Originally Posted by
9easy
Allegiant will probably do better in the next recession compared to its peers.
Unlike other airlines like WN or UA with massive orders of new planes to pay for on a monthly basis, Allegiant planes are old and paid for. The flight schedule can be reduced, and while revenue will also be reduced, expenses like fuel/salaries will be reduced by a corresponding amount. Meanwhile at other airlines they will be forced to fly new and expensive planes at a loss just to keep any kind of revenue coming in. This is just history repeating itself.
First off, Allegiant has orders 12 new planes. Secondly, Allegiant is not the only airline buying used planes. WN and UAL, among others, are buying used, and have been doing so for quite a while.
https://www.bloomberg.com/news/artic...d-me-down-jets
https://skift.com/2016/05/12/u-s-air...ond-hand-jets/
History repeating itself? Hardly. AAY's former President, Andrew Levy, is now the CFO at UAL. Evidence that legacies are laser-focused on ULCCs and doing what they need to prevail, including joining in on the low cost model. Yes, legacies have mature labor contracts, but AAY pilots just signed a contract containing a 30-40% increases in pay, retirement, benefits and improved work rules? Other labor groups are likely to follow. New planes, new contracts, no longer looking like ULCC.
https://www.usatoday.com/story/trave...ited/98213256/
Allegiant may own some of their aircraft, but like others, they (wisely) lease or finance aircraft depending on the benefits of tying up cash vs. the cost of borrowing money. If I'm not mistaken, they elected to finance their latest purchase of 12-14 factory new airbii. When money is cheap, airlines tend to finance aircraft and spend cash elsewhere. If one is looking for stronger indicators, the balance sheet (assets/debt) is more telling as it allows for a company to buy down debt if needed in a pinch.
BTW, WN also owns over 80% of their aircraft
https://www.quora.com/Do-Southwest-A...nt-their-fleet
Don't get me wrong, I congratulate the AAY pilots and appreciate them raising the bar. I wish AAY the best, I just don't believe others are sitting idle while they, Spirit, Frontier invade their markets. Spirit took a beating last year because it took on the legacies and and lost. Allegiant has been wise staying under the radar and focusing on under-served markets. Time will tell whether they stick to the winning formula or morph into other successful enterprises.
https://www.fool.com/investing/2016/...overy-tak.aspx