On Wednesday, Allegiant Air announced a major order for up to 100 Boeing 737 MAX aircraft. With 50 firm orders for MAX 7 and MAX 8-200s and 50 options, Allegiant is going big, though it is not committing itself to an all-Boeing fleet. To learn more about this order and Allegiant’s interest and plans for the MAX, Simple Flying spoke with Allegiant’s Chief Financial Officer, Greg Anderson.
Recap: Allegiant’s MAX order
Allegiant Air ordered 50 firm Boeing 737 MAX 7 and MAX 8-200 aircraft on Wednesday. This is split between 30 of the MAX 7s and 20 of the MAX 8s. The first ten aircraft are scheduled to arrive in 2023. Another 24 planes will be delivered in 2024, and the remaining 16 will arrive in 2025. The split between the MAX 7 and MAX 8-200 is not necessarily surprising, given that the commonality between both variants gives a lot of flexibility for the airline.
Allegiant secured options for 50 more MAX jets as part of the order. These options are not yet broken down by model. Allegiant will look at demand and weigh its plans to decide how many of which models it will take. An order option gives Allegiant a set purchase price and the ability to expand its order without committing to the aircraft at this time. Options are common with orders and give airlines flexibility.
Some of the key reasons Allegiant went with Boeing
One of the big benefits Boeing had was that it could guarantee a quicker delivery timeline. With the first of the MAX jets expected to arrive next year and the order complete within four years, this played a part in the decision-making process, according to Mr. Anderson.
Looking a little closer at the aircraft, another big benefit for Allegiant was the fuel efficiency. Compared to the current Airbus fleet, the next-generation MAX offers a roughly 20% improvement on fuel burn, which gives an added financial benefit to operating those aircraft.
The MAX has been a popular aircraft with many airlines. United placed a blockbuster order for it in 2021. Ryanair has committed to the MAX 8 200. Southwest is a huge fan of the type. However, inducting a new fleet comes with some cost and some headwinds, but according to Mr. Anderson, Boeing came in fully committed to giving Allegiant the support they need to induct the fleet:
“A part of the deal that made a lot of sense for us was making sure that we had Boeing’s full support. They came to the table in terms of bringing on a new fleet type, and making sure that it’s as seamless and efficient as possible.”
Inducting a new fleet type also requires bringing in support from the engine manufacturer. Manufacturer CFM’s LEAP 1-B engines will be on Allegiant’s MAX aircraft. As part of the announcement of the MAX deal, Allegiant also announced an exclusive maintenance agreement with CFM for the LEAP engine fleet that includes support of the existing Airbus fleet. Remember that Allegiant will continue to fly its Airbus fleet and expects to engage in opportunistic acquisitions of used A320s.
The opportunities are out there
The big impetus for acquiring the MAX jets is to support Allegiant’s growth and future fleet plans. In the network, Allegiant sees new opportunities that arise from the MAX:
“Currently we fly 600 routes. We’ve identified 1,000 routes more on top of that, that we can grow into and with this new order we feel like that 1,000 goes to 1,400, so 400 incremental more routes that we can serve and that make a lot of sense for us.”
Allegiant is not looking to undergo a rapid change in its model or in the way that it has structured its network. It will still focus primarily on a leisure demographic, but the MAX does offer some compelling advantages over the current fleet, primarily in the question of range. Add in Allegiant’s interest in Mexico under a proposed joint venture with Viva Aerobus, and the opportunities are abundantly clear.
Part of the way Allegiant sees the 737 MAX fleet working is that it, essentially, describes its base strategy as small airlines within an airline. As Mr. Anderson explained:
“If you think about a base for us, it’s like airlines within an airline. So each base has its own infrastructure. You have your own crew, your own mechanics, supply chain support, all of that.”
This makes it easier on operations from a mixed-fleet perspective. Allegiant can and likely will isolate some of its bases to be primarily Boeing 737 MAX operations, which will not add to the inefficiencies of managing a mixed fleet in one base and needing to incur the maintenance and support for both the Airbus and Boeing planes at all of its bases.
Allegiant has operated a split fleet before. It has learned the lessons, as Mr. Anderson stated, and it is confident that there are benefits from moving to the Boeing and Airbus operations it is looking at now. As Allegiant plans to grow, these planes will be indispensable.