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  Allegiant Air

  IATA/ICAO Code:

  G4/AAY

  Airline Type:

  Ultra-Low-Cost Carrier

  Year Founded:

  1997

  CEO:

  John Redmond

  Country:

  United States

  Region:

  North America

On Friday, June 17th, 2022, Allegiant Air announced that its outlook for post-summer travel exceeded that of pre-pandemic levels.

Notable growth

Allegiant Air has reported that the profits from May 2022 have been higher than in May 2019. Later in the report, Allegiant claims that the post-summer booking which occurs out of the peak season is notably higher than it was for the same timeframe in 2019.

An industry on a rollercoaster

In 2019 the world economy was booming. Air travel was reaching record highs and there was no better time to be in the airline business. Unlike past economic high points, this growing world economy was built on steady, stable methods. Just as everything seemed to be looking up, the industry was hit with a curveball. The COVID-19 pandemic had begun.

When the world closed its borders at the start of the pandemic, air travel came to a halt. The recently booming and stable airline industry was left in shambles. Many airlines had to take extreme measures to avoid bankruptcy. Despite their best efforts, airlines suffered tremendous losses during this period of uncertainty. When nations began reopening their borders and air travel resumed, overbearing levels of demand came crashing down on what remained of these businesses.

Seemingly overnight airlines became swamped with demand from people ready to get out and return to a pre-COVID world. This resulted in a boom in air travel. Today this demand is still present and continues to put pressure on airlines.

With the pandemic came a deficit of resources. Now that air travel is back in full swing, airlines are continuously squeezed by these shortages. Everything from pilots to gasoline is now in short supply leaving airlines with less wiggle room than ever before.

May reports

Despite these difficulties, Allegiant Airs' Senior Vice President of Revenue Drew Wells stated,

"We grew capacity by nearly 16 percent during May, as compared with 2019, and completed the month with a load factor of 87 percent, the highest month since the onset of the pandemic,"

He went on to state that,

"Demand strength continues to persist with forward bookings outpacing future capacity growth and continuing to trend higher than levels observed during 2019."

"...bookings into the off-peak season are also trending higher than 2019. We continue to expect June loads to surpass May levels, with loads expected to be roughly 90 percent."

"Due to heightened cancelations, we expect total revenue for the quarter to come in on the low end of our previous guide, at up roughly 28 percent compared with 2019. In addition, we now expect total system capacity to be up roughly 11.5 percent for the quarter, year over three-year."

With a continued rise in demand, Allegiant Air anticipates that its profits will be up at least 28 % for this quarter alone. They also anticipate that their system capacity for this quarter to be up 11.5 % over this quarter in 2019.

Cost of fuel

Fuel has always been one of the largest expenses for any airline. With the latest rise in fuel prices, airlines have to calculate just how much additional revenue will need to go into the cost of fuel for each flight. Gregory Anderson, the Executive Vice President, and Chief Financial Officer addressed this concern regarding profits,

"The average cost per fuel gallon in May was $4.41 and we now expect to finish the quarter at an average cost per gallon of $4.30... This increased fuel cost over our previous guide of $4.00 per gallon will result in roughly $18 million in excess expense throughout the quarter."

Allegiant anticipates that even with the enormous expenses placed upon the airline, its profit margins are large enough that growth will continue into the next quarter.

Do you think that airlines will be able to hold onto their profit margins amid rising expenses? Let us know in the comments below.