Citing a decline in demand for travel, Allegiant Air is taking steps to alter its operations amid the global COVID-19 pandemic. One of those steps includes delaying two new bases in Iowa and North Carolina as announced by the carrier on April 14th.
Allegiant Air delays new bases
Allegiant Air had previously planned to open up two new bases in Des Moines International Airport (DSM) in Iowa and Concord-Padgett Regional Airport (USA) in North Carolina this year. Now, the launch of those bases has been delayed until a further date.
In addition, Allegiant had planned to start service to the Houston-area via William P. Hobby Airport (HOU) and the Boston-area via Boston-Logan International Airport (BOS). Now, the start of those services has also been delayed.
These moves also come alongside 80 to 90 percent capacity cuts over April and May. And, the carrier also indicated that it does not expect travel to resume fully for the busy northern summer season.
The airline also released March traffic numbers. Passenger count last month was down 39.8% from March 2019. Overall first quarter passenger count was down 7.8% from the same time last year. Load factor in March was down to 59.4% from 86.1% in the same month in 2019.
A major hit to the airline’s finances
In terms of revenue, Allegiant Air also anticipates revenue for March 2020 to be 40 to 45 percent lower than 2019. April and May are likely to be worse. As a result, the airline is reviewing the opportunity to receive a federal Payroll Support Grant or loan assistance as provided in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
In order to receive funding under the CARES Act, airlines have to maintain a minimum amount of service depending on season and operations. For large, full-service carriers, most operations in the United States run around the year to markets with largely steady demand and multiple daily flights.
However, for a low-cost carrier like Allegiant, operations in December are not the same as operations in June. Catering primarily to leisure travelers from small- and medium-sized destinations, demand to some destinations changes seasonally. In addition, not all destinations are served multiple times daily. In some cases, flights operate multiple times a week. With complex operations like this, Allegiant wants to carefully examine its options to receive funding to weather this crisis.
Executives and officers at the Allegiant Travel Company cut their salary from between 50 and 100%. In addition, about 15% of the company’s workforce has taken 60-day voluntary leave at half pay but with full benefits. In addition, the company has paused some of its non-airline projects including a Florida resort.
Allegiant affected more than full-service carriers
Allegiant Air is largely more affected than full-service carriers. Leisure demand is already volatile and subject to some sharp changes. While full-service carriers can rely a bit on business travelers, low-cost carriers like Allegiant do not cater that group of passengers.
Air travel demand will not rebound sharply. It will take time for people to strengthen their own finances if they were affected by the economic downturn. And, just building up confidence in containing the spread will take time. As of writing, the virus is continuing to spread in the United States and impact additional cities.
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