Yesterday, Allegiant announced that it would add a third aircraft type to its stable. The airline’s first A319 will be delivered in the fourth quarter of this year and Allegiant will take a total of 19 aircraft to start. I’m not surprised that Allegiant went this route, but I guess I am a little surprised at the timing.
After a few fits and starts, Allegiant found its groove by picking up airplanes nobody wanted. Airlines didn’t want the MD-80 because the fuel and operating costs were higher than newer models, but because the airlines didn’t want them, Allegiant could get them for cheap. Low ownership costs plus higher operating costs still made for a great deal and Allegiant grew to have 58 of the airplanes, making bank all along the way.
But the MD-80 couldn’t serve every route Allegiant wanted. The first effort to stray was to get some 757s to fly to Hawai’i. But the 757 is a big airplane so it’s hard to see how it could really fit into Allegiant’s style of service on the mainland.
Allegiant could have continued to buy MD-80s (there are still hundreds of them flying), but the airplane has limitations. It’s a runway-hog and can’t operate off of some smaller airports. Gary, Indiana comes to mind as a place that initially had Allegiant’s service canceled because of runway issues. Also, the MD-80 doesn’t have excellent range for some of the longer routes Allegiant might be interested in serving.
So it’s no surprise Allegiant would be interested in newer airplanes that fix that problem. I always thought some of the longer range 737-400s and -300s that US Airways has been getting rid of would be good airplanes. But Allegiant leapfrogged that idea to a newer airplane that’s certainly lower cost to operate. The reason I’m surprised about the timing is that I can’t believe ownership costs have dropped enough on a current generation model that it made sense for Allegiant to go that route.
A319 Freefall
But that appears to be exactly what’s happening with the A319. Think of the A319 – who wants it? Most airlines are moving toward larger airplanes with their narrowbody acquisitions. Southwest built its operation on the similarly-sized 737-700 but it is currently taking delivery of a bunch of larger 737-800s. Delta and United have gone even bigger with 737-900 orders. And US Airways is retiring 737s in favor of much larger A321s. Only American really wants A319s at this point in the US.
More importantly for Allegiant, Cebu Pacific no longer wants its A319s and instead wants A320s. Also, easyJet has been slowly shedding its older A319s for the last year. So larger airplanes are doing well, but the values of the A319s are apparently collapsing quickly. Allegiant posted this slide in a presentation on the A319 acquisition:
This chart assumes that Allegiant keeps the same low utilization of 8.9 hours a day that it has today on its MD-80 fleet. As you can tell, the ownership costs are double those of the MD-80 but the savings are much greater in terms of maintenance and fuel. (Allegiant learned the hard way that maintenance is expensive when it spent millions on rehabbing engines.) If utilization goes up, savings go up as well.
Packing ’em In
So when others don’t want the A319, Allegiant can pounce. But Allegiant is going for a very specific type of A319. It is leasing all 10 of Cebu Pacific’s airplanes along with 9 that were operated by easyJet. What’s so special about these? They have two overwing exit doors on each side while just about all the others have one. Why the difference? Well, the additional exits mean they can jam in extra seats above and beyond 145. Allegiant will operate these airplanes with 156 seats. For comparison, JetBlue puts 150 seats on an A320, a much bigger airplane.
This is a little surprising since those 6 extra seats above 150 mean Allegiant will need another flight attendant onboard. It’s hard to imagine that’s worth it. Maybe one of these days Allegiant will pull a row out, but that’s not the plan for now. For now, it’s all about cheap fares and jam-packed airplanes.
There’s good news and bad news with this. The good news is that these airplanes can fly further and into airports with shorter runways, meaning new routes could be opened up. The bad news is, your knees are going to pay. That’s not too bad on a short flight, but if these airplanes do start stretching their legs across the country, then it might be a tough to take.
