Allegiant Delays Hawai’i Until 2012, Goes Head-to-Head with JetBlue

Allegiant gave an investor presentation this week, and there were a lot of juicy nuggets of info in there. It looks like Hawai’i is delayed thanks to regulatory issues, and the airline seems to be experimenting with a route that JetBlue already flies: Long Beach to Las Vegas. I’m guessing these two things might be related. There were also some interesting points about the Orlando airport switch. Add to that the project to increase the number of seats on the MD-80 fleet and you’ve got an incredibly busy airline.

Hawai’i in 2012
According to Allegiant, Hawai’i is “now a 2012 goal.” Why? It’s a regulatory issue, and really, Allegiant 757 to Hawaii in 2012it’s one the airline probably could have seen coming. Allegiant was initially trying to do three things from a regulatory standpoint at once in order to get to Hawai’i. First, it had to get the 757 on its operating certificate since it hadn’t flown that airplane before. Then it had to get “flag” status for the airline, which is required for flights to Hawai’i because of the distance from the mainland. Lastly, the airline needed to get approval to fly the 757 over water for long periods of time without a nearby alternate (called ETOPS). That was aggressive and it’s just not going to happen.

Instead, Allegiant is going to get two 757s flying in 2011 (hoping for a summer start) on routes on the mainland. The other airplanes are being leased out until the airline can fly to Hawai’i. But where are these airplanes going to fly on the mainland? Other than on charters, we can expect to see the 757s flying on flights over four hours from Vegas as well as on “current, dense routes.” I imagine that’s something like Bellingham-Vegas, which is flown multiple times daily during the peak season.

Once that’s all up and running, then Allegiant will work on getting ETOPS for the fleet. The goal is to then be able to fly to Hawai’i by summer 2012. And that leads me to the next interesting note.

Allegiant Starting Long Beach-Las Vegas Against JetBlue
It looks like Allegiant doesn’t really know what to do with its 14 weekly Long Beach slots, so it’s now turning to what it calls an “experiment.” The airline will begin flying from Long Beach to Las Vegas, a route that JetBlue already flies three or four times a day depending on the season. Why would the airline do this when its goal is generally to avoid direct competition like the plague?

I think Allegiant is at a loss for how to use its slots. Right now, it flies twice a week to Bellingham, Colorado Springs, and Idaho Falls. Those will continue. It also flies three times a week to Stockton, and that is awful. It’s one thing to lose money for a few months while you wait for the Hawai’i flying to start (at least, I continue to assume that’s what the slots will be used for), but it’s another thing to keep losing money all the way into 2012. How do you sit on the slots without losing a ton of money?

Since Allegiant has to use half its slots consistently in order to hold on to both of them for the future, it has to do something. It also doesn’t want to base an aircraft in Long Beach and it doesn’t like having crew overnights. The airline does Idaho Falls, for example, by flying Vegas-Idaho Falls-Long Beach and back all within a day, but there aren’t many dots on the Allegiant map that can fit in so much flying like that. So Allegiant is turning to Vegas to fill the void and hopefully stop the money pit from growing. I’ll be very curious to see if it works.

The Orlando Airport Fight
When Allegiant decided to move some of its flights from Orlando/Sanford over to the main Orlando airport, I figured it would be a matter of time before everything moved. But Allegiant went the opposite way and instead recently decided to move everything back to Sanford. Why would you move to an airport that’s all the way on the other side of the city from where the main attractions are?

In the presentation, Allegiant revealed that its costs excluding fuel were 25 percent higher at Orlando than at Sanford. That’s not a surprise. Sanford is a small airport with very little service on the wrong side of town from Disney and friends. Orlando is the main airport in town, so you would expect costs to be somewhat higher. You would also assume that revenues would be higher too, but in this case, apparently it wasn’t enough for Allegiant to stick around. I assume there’s a lot more behind this story that we don’t know, and probably never will.

Combine everything here with the airline’s efforts to add 16 seats to every MD-80, and you have an incredibly busy airline working on a million different things. So far it doesn’t appear to have necessarily distracted the airline that much, but I imagine it really has the potential to do that. It’s worth keeping an eye on these guys just to see if they can keep up.

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