Forbes on profits & ULCCs
01-02-2020, 05:50 AM
#11
Banned
Joined APC: Dec 2019
Posts: 193
Allegiant was the highest profit margin airline in the US last year. Funny how everyone overlooks that. Most of our income comes from travel packages and ancillary revenue. We also fly older aircraft that are mostly paid for, and park them on days nobody flies (Tuesday/Saturday, major holidays). Most of our routes are only flown 3x a week. 97% of our routes have no competition.
The ULCC model is like a gas station. You put a sign out on the freeway advertising the lowest price in the area and everyone stops to fill up. You lose money on the gas, or at best break even, but while everyone is in the gas station, they buy snacks and drinks. That's where the real money is made.
Allegiant was around in the 2008 recession and actually grew. Those who would have bought tickets on the big airlines tried Allegiant out instead due to price pressure. A common saying has been "We don't compete with the other airlines, we compete with Home Depot, because people in the rural midwest decision weighing is "renovate the kitchen this summer, or go on vacation"? People are still going to go on vacation, in fact, hard times make people want to relax more, but they become a lot more price conscious. The ULCCs don't want or care about business travelers. As the industry matures, we are going to see more and more of the leisure travelers getting off the legacy carriers to to point that the legacies are only business "HVCs" and transoceanic passengers.
The next recession will see consolidation in the ULCCs. whoever has the most cash will be the one acquiring.
The ULCC model is like a gas station. You put a sign out on the freeway advertising the lowest price in the area and everyone stops to fill up. You lose money on the gas, or at best break even, but while everyone is in the gas station, they buy snacks and drinks. That's where the real money is made.
Allegiant was around in the 2008 recession and actually grew. Those who would have bought tickets on the big airlines tried Allegiant out instead due to price pressure. A common saying has been "We don't compete with the other airlines, we compete with Home Depot, because people in the rural midwest decision weighing is "renovate the kitchen this summer, or go on vacation"? People are still going to go on vacation, in fact, hard times make people want to relax more, but they become a lot more price conscious. The ULCCs don't want or care about business travelers. As the industry matures, we are going to see more and more of the leisure travelers getting off the legacy carriers to to point that the legacies are only business "HVCs" and transoceanic passengers.
The next recession will see consolidation in the ULCCs. whoever has the most cash will be the one acquiring.
01-02-2020, 06:12 AM
#12
Gets Weekends Off
Joined APC: Mar 2007
Position: Petting Zoo
Posts: 2,074
Originally Posted by senecacaptain
with that said, Spirit and Frontier are growing like wildfire. Where is the growth at AA or DAL. I don't mean retirements of senior Captains = I get to the left seat faster. I mean growth aka new routes, new cities, new aircraft (not replacements of old aircraft).
The next recession will cull the herd, as always happens. Spirit has a proven business model that has survived in good times and bad.
But if I knew how to predict the future I wouldn't be flying planes for a living
01-02-2020, 07:50 AM
#13
Gets Weekends Off
Joined APC: Aug 2016
Posts: 252
Originally Posted by KIGECA97531
Allegiant was the highest profit margin airline in the US last year. Funny how everyone overlooks that. Most of our income comes from travel packages and ancillary revenue. We also fly older aircraft that are mostly paid for, and park them on days nobody flies (Tuesday/Saturday, major holidays). Most of our routes are only flown 3x a week. 97% of our routes have no competition.
The ULCC model is like a gas station. You put a sign out on the freeway advertising the lowest price in the area and everyone stops to fill up. You lose money on the gas, or at best break even, but while everyone is in the gas station, they buy snacks and drinks. That's where the real money is made.
Allegiant was around in the 2008 recession and actually grew. Those who would have bought tickets on the big airlines tried Allegiant out instead due to price pressure. A common saying has been "We don't compete with the other airlines, we compete with Home Depot, because people in the rural midwest decision weighing is "renovate the kitchen this summer, or go on vacation"? People are still going to go on vacation, in fact, hard times make people want to relax more, but they become a lot more price conscious. The ULCCs don't want or care about business travelers. As the industry matures, we are going to see more and more of the leisure travelers getting off the legacy carriers to to point that the legacies are only business "HVCs" and transoceanic passengers.
The next recession will see consolidation in the ULCCs. whoever has the most cash will be the one acquiring.
The ULCC model is like a gas station. You put a sign out on the freeway advertising the lowest price in the area and everyone stops to fill up. You lose money on the gas, or at best break even, but while everyone is in the gas station, they buy snacks and drinks. That's where the real money is made.
Allegiant was around in the 2008 recession and actually grew. Those who would have bought tickets on the big airlines tried Allegiant out instead due to price pressure. A common saying has been "We don't compete with the other airlines, we compete with Home Depot, because people in the rural midwest decision weighing is "renovate the kitchen this summer, or go on vacation"? People are still going to go on vacation, in fact, hard times make people want to relax more, but they become a lot more price conscious. The ULCCs don't want or care about business travelers. As the industry matures, we are going to see more and more of the leisure travelers getting off the legacy carriers to to point that the legacies are only business "HVCs" and transoceanic passengers.
The next recession will see consolidation in the ULCCs. whoever has the most cash will be the one acquiring.
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