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Did you catch Allegiant’s June traffic report? The airline posted an unreal 94% load factor for the entire month. This has to be a world record.
In the past, airlines have struggled to even get north of 80%, but that’s changed in the last few years. With the exception of Southwest, which always lags behind, most airlines have crept up into the low to mid 80% range consistently. Why can’t they get higher? Well, there’s never going to be enough demand to fill every flight. That 6a flight on a Wednesday morning from Wichita to Denver just probably won’t fill up.
Of course, airlines would prefer to fly only when demand is highest, but that would mean sitting planes on the ground when demand is lower, and that’s generally not the right decision when you still have to pay the high costs of owning that plane whether it’s in the air or not. Chances are, if you can fill 60% of seats on that 6a flight, you’ll still make enough money to make it worthwhile, though as the price of fuel increases, that threshold becomes higher. And there probably isn’t another place you can stick that aircraft at that time of day to make more.
Allegiant, however, has a lot more flexibility with its planes. It generally only flies routes a couple times a week, and it targets price sensitive leisure travelers. So, there’s usually enough demand to fill a couple planes a week and people who are price sensitive are often willing to adjust their schedules to save money. If demand is truly low, Allegiant can move planes around and even park them since their cost of ownership is so low (older, fuel-inefficient planes = cheap).
Bottom line: these guys did an incredible job of scheduling planes and setting prices to match demand in June. It shows why they’re considered one of the bright spots in this industry right now.
(Full disclosure: I own a very small number of shares of these guys)
posted by Brett Snyder
July 3, 2008 @ 7:41 am
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