Allegiant and Boeing announced last week that the airline would buy 50 737 MAX aircraft with options for another 50. On the surface, this sounds crazy since Allegiant is an Airbus operator that generally prefers to acquire used aircraft. But this isn’t crazy; it’s just a further continuation of Allegiant’s strategy to take advantage of good opportunities when they arise.
According to ch-aviation, Allegiant today has 35 A319s and 86 A320s in the fleet. The A319s might seem like a bad airplane for a low-cost operator, but these are special A319s that have two over-wing exits on each side and consequently can hold 156 seats. The A320s come in two flavors… 27 of them have 177 seats while the rest are at 186. Thirteen of the A320s came factory fresh from Airbus while the rest were all second-hand.
Allegiant likes the A320s, and in fact, on a call last week it said it actually has placeholders in its fleet plan for an additional 22 that it expects to pick up on the used market. The A319s, well, it likes to consider those a swing fleet. It may very well retire them in 2025, or it might not if there is opportunity.
As CEO Maury Gallagher explained on that call, Allegiant is planning for a 10 percent growth rate per year through the end of the decade, getting the airline into the 250 fleet range. According to Maury, there just isn’t a way to get enough aircraft on the used market to make that happen. After all, Allegiant won’t just take any airplane. It needs something that fits the fleet well.
Enter Boeing, a company that has had a rough go of it for, um, well, for a long time. This year the MAX has proven itself as a reliable and safe airplane, and Boeing has sold a decent number of aircraft. But the manufacturer just recently lost two high-profile deals to Airbus at Qantas and KLM, both of which operate Boeing narrowbodies today. Boeing needed a win, and this was a great opportunity to get it.
Allegiant will take 30 of the MAX 7 aircraft and 20 of the MAX 8 200 planes which were purpose-built for Ryanair to be able to cram more seats into the airframe. The MAX 7 may seem like an odd choice until you realize what Allegiant will do with them. The airline is planning for a remarkable 173 seats onboard. Southwest, for comparison, is planning for only 150.
With 173 seats, the economics of that airplane become very good. Of course, it can’t beat the seat costs of putting 200 seats on the MAX 200, but look at this from Allegiant’s presentation.
In this configuration, seat costs per departure are about $10 below what they would be in Southwest’s configuration. Think about it another way. Including ownership costs, the MAX 7 will be cheaper to run on a per seat basis than the A320. That is pretty fantastic.
This, naturally, means Allegiant got an incredible deal on the airplane, and that is no surprise considering how much of a win Boeing needed. From Allegiant’s perspective, it could get a cheap, efficient airplane and it could get it soon. First deliveries are in June of next year. Even if it could get a good deal on the neo family from Airbus, which it probably couldn’t, there aren’t delivery slots to get Allegiant the airplanes it needs when it needs them.
What about the A220? That was in the mix, but there are a couple issues. First and probably most important, Allegiant wants to be able to go bigger. While an A220-500 might get built, it won’t happen soon enough for Allegiant’s needs. And by the way, putting 173 seats on the MAX 7 makes it easily competitive with the A220 anyway. The other A220 concern, according to Allegiant, is low spare parts coverage.
So, with the right ownership costs, the MAX starts to look pretty good to Allegiant. But wait, there’s more. Mentioned multiple times on the call last week was the engine commonality. Allegiant has CFM engines on its Airbus fleet, and it will also have CFM engines on the Boeing fleet. (The A220s is Pratt-powered.) I have little doubt that Boeing sat on GE/CFM to help sweeten the pot. Allegiant noted that it will receive “enhanced” support on its existing engines as part of this deal. Just call that the cherry on top of the sundae.
Still, I know many will have trouble getting over the idea that two fleet types adds complexity and is costly. But it’s really not when you have fleets this big. Further, Allegiant’s unique network strategy makes it even less problematic.
Allegiant has its big bases in places like Las Vegas and Orlando/Sanford, but it also has small bases scattered around the country in places like Des Moines, Grand Rapids, and Knoxville. While it had about a third of its flying from those small bases in 2019, that has climbed to nearly half in 2022. And Allegiant thinks of those like mini-airlines.
The airplanes and crews start every day in each base and finish their days there as well, sleeping in their own beds. This self-contained operation means Allegiant can create Boeing bases and Airbus bases and not have to duplicate spare parts, etc in those smaller markets. That’s yet another reason Allegiant can do this without much trouble.
For Allegiant to get all these airplanes for cheap along with engine support on the entire fleet means the airline can easily fulfill its growth plan with less hassle. This is a great coup for the airline. It’s also a big win for Boeing to finally get a sale of the MAX at one of the US ULCCs, so everyone should be happy.
Interesting analysis, Brett.
Will the seat pitch on the Boeings be less than Allegiant’s current ~30 inch pitch on the Airbuses?
And will Allegiant finally ink deals with local chiropractors in each of its stations, and start handing pax coupons for discounted back adjustments as they deplane? /sarcasm/
Don’t forget about the massage therapists, you’re going to need one after being in that type of torture chamber of a seat.
I didn’t realize that Allegiant had that large a fleet considering their network is more decentralized compared to United, Delta or American.
While we’re picking on Allegiant (and I do feel somewhat guilty in doing so, as I have friends/family who love them, but I do my absolute best to avoid them), I’d also add “travel insurance”, but I’m not sure if the “travel insurance” that Allegiant sells (or if 3rd party travel insurance) covers the cost of last minute flights on other carriers if/when a passenger’s flight on Allegiant is significantly delayed/cancelled.
Perhaps Cranky Concierge’s services (and leaving a credit card on file with them, so that they could immediately rebook on another airline in the event of irrops on Allegiant) would be a better buy for those concerned about Allegiant’s reliability.
Again, I do hate to pick on Allegiant, but when an airline flies many routes only a few times a week, runs its network fairly tight (in terms of spare crew/planes), has more than a few cancellations, and absolutely refuses to book pax on other airlines when it cancels a flight, well… Buyer beware.
Kilroy – Travel insurance benefits can vary, so you do need to look at options. But having a card with Cranky Concierge can get you somewhere, you’re just likely to have to pay a lot more than originally paid and you’ll have a stop included. So it won’t be ideal, that’s for sure.
Kilroy – There aren’t any details beyond the seat count, but this will be a tight squeeze. What I don’t know is just what they can do with cabin space. If you pull out galleys, etc, there’s probably more that you can do to provide passenger space and still have a high seat count. I suppose we will find out.
I was at first really disappointed when I heard this news that Allegiant was going to Boeing from Airbus because of the fact that airbus planes can have wider seats, I then remembered that Allegiant is the one airline who’s Airbus Narrowbodies don’t have this advantage since they went with an extremely wide aisle, the widest aisle I think I’ve experienced on a plane and installed basically the same narrow 17 inch seats on their Airbuses that they had on their now-retired MD-80s (I’ve flown on both), and has gone with what I think the widest aisle I’ve ever experienced on a plane. Each time I’ve flown on one I’ve joked with myself that you could have a ballet class in the aisle, it’s so wide, but I think most passengers would much prefer to have a little extra seat width.
I wish Allegiant had done what Frontier Airlines did/does (I thought I read that Frontier was changing their seats so this might no longer be the case?) with their wider middle seats on their Airbuses. The middle seat on a Frontier plane, along with the wide seats on an Embraer E-Jet (we haven’t flown on an A220 I’m excited to try one though) are super size inclusive, they are only seats my wife can sit in without the armrests squishing up to her hips (We fly Southwest whenever we can since we can use their customer of size policy and she gets a free second seat).
173 seats on a 737-7 should send chills down any [sensible] person’s spine, literally…I don’t care how cheap the ticket is.
Staggering number of seats. I don’t ever want to fly G4 but I’m impressed at their ability to regularly innovate in what is generally a pretty staid and homogenous industry.
What is “engaged” engine service? I’d hate to think they were making do with anything less than they needed so I’m not sure what is gained by that enhancement.
Ugh, dreaded typo alert. I meant “enhanced” not engaged.
Bill – This is probably more of a financial agreement than anything. I do know that the new engines will fall under a “power by the hour” agreement which means that you pay a certain amount for every hour flown and maintenance is part of the package. While I don’t know what will be happening to the existing fleet, it could be something along those lines, they get certain maintenance procedures included in a package. Either way, I wouldn’t worry that this means they’ve been skimping before. It should just mean more is included from the manufacturer.
I assumed “power by the hour” was how engine manufacturers had ‘sold’ their engines for years – was sure RR was doing this many years ago…?
Bobber – These are GE/CFM engines, but yes, it’s nothing new. Still, with Allegiant purchasing most of their airplanes on the second hand market, it wouldn’t surprise me if that wasn’t an option.
Thanks for the clarification. I didn’t think they had been skimping. Just though I’d take the opportunity to learn something else about the industry from you. Thanks as always!
> I don’t ever want to fly G4 but I’m impressed at their ability to regularly innovate in what is generally a pretty staid and homogenous industry.
I agree with you entirely on that. G4 may not be the airline for me, but it has its place and niche. I absolutely respect its willingness to try new concepts and business/pricing models to help differentiate itself.
As much as I pick on G4, I’d argue hard that its efforts have been a net positive for consumers and that it should continue to have the freedom to do so, without additional regulation (such as rules specifying minimum seat pitches) that would limit it.
Totally agree. And TBH they don’t need to care about me as a customer, I’m not in their wheelhouse. I live 10 minutes from DCA.
But I’ll say this much… if I lived in Minot ND and could fly nonstop to Vegas cheaply, I’d sure as hell overlook many of the shortcomings!
Great analysis of how this move makes a lot of sense. And, it’s clear that Allegiant got a great deal from Boeing – and that info regarding engine commonality provides great insight into just how much of a deal they were able to negotiate. This is an airline that was never, ever, about the passenger experience. It was always about being low cost and maximizing profits in that market. They corner the market on leisure flying in markets that few others compete in. Therefore, they can get away with slamming this many seats on a MAX 7 or operating the MAX 8-200 – both of which sound like absolute torture chambers to fly in.
I have friends in the SW FL area who complained about flying Allegiant a number of times – back when Allegiant had much worse reliability, older planes, and well-publicized safety concerns. The flights were very late, the flights were terribly cramped, the flights seemed dangerous, etc – I heard them all. Yet when I advised these folks to not fly with them, their answer was that there were nonstops that nobody else offered and that you can’t beat the price. And these are people who have enough money to fly a full service airline. So that, in a nutshell, is what this airline is banking on.
And, to be fair to Allegiant, it does appear that their reliability has improved and I haven’t read anything negative regarding the safety of their operation in a couple of years. Being a tall guy, I would never fly them. But plenty of others feel differently, even if they complain every time.
stogieguy – Allegiant has been testing an Allegiant Extra product with more legroom and they indicated they were hoping to expand that test further on this call. So there may be an opportunity in the future for tall people to give them a shot.
I could definitely see Allegiant taking a page out of Spirit’s playbook and offering a few more rows (beyond the exit rows) of extra leg room or a row or two of bigger/better seats. It would be another great way for Allegiant’s pax to further discriminate themselves on price, by creating another optional “frill” to buy, and would add value to pax who want more leg room.
When I flew Spirit for Thanksgiving, I was very impressed at how Spirit tried to wring top dollar out of its “Big Front Seats” (or whatever they are), starting with relatively high upcharges during booking, then with an email a few days before the flight soliciting bids from pax to upgrade to those seats, more offers during check-in/boarding pass printing, and with continued announcements from the gate agents before boarding began. I bet there are some Spirit flights where no two people/families paid the same upcharge amount for the Big Front Seats, each paying amounts at or less what they believe it’s worth to them.
Kilroy – I’ve flown spirit once. For me, the big front seat is worth whatever they are charging and probably more! Pleased to hear G4 testing a similar concept.
The issue of Allegiant adding the MAX is not about a switch to Boeing as it is about adding a second fleet type which has generally been something to avoid in low cost and ultra low cost strategies.
The charts highlight that the real point of ULCCs is not legacy airlines and siphoning traffic off of legacy carrier hubs but rather point to point traffic to leisure destinations and that is heavily carried by LCCs and ULCCs. For Allegiant to be willing to highlight precisely how their costs line up with Southwest gives you an pretty good idea who they are targeting.
Is there any update on the MAX7 certification @CF? I thought I saw a note from WN with disappointment on how it was going and it might not finish until the end of 2022? Will this impact when G4 might be able to get their hands on them?
BeeInbigD – That’s the next post I’ve been working on! No, there isn’t an update, and the FAA is really hamstringing Boeing unnecessarily right now to cover its own butt. But the hope is that it will be certified soon. In theory.
There could be another consideration here if you are big enough: “don’t put all your Basques in one exit”. If your fleet is all one type and that gets grounded it’s devastating. See DC10, 787 and Max for examples.
What do “Stations” in the cost breakdown mean?
DC – Stations presumably involve the costs of operating at each airport, otherwise known as a station for an airline.
What does the “bh” stand for in gal/bh?