Business Analysis on Allegiant Air

Allegiant Travel

Ana Maria Llosa Nanaka Sakurai Jose SamayoaGabriel Zea

Background Information

Allegiant air was founded in 1997 under the name of West Jet Express

After a trademark dispute with Wet Jet Air they adopted the name Allegiant Air

December 2000 Allegiant filed to Chapter 11 bankruptcy protection .

June 2001 the airline was restructured to a low cost model and moved the headquarters to Las Vegas.

March 2002 they successfully exited the bankruptcy.

Low Cost Airline

Operated by scheduled and charter flights

Publicity traded company

Background Information

Air Routes

At Allegiant, travel is our deal!Allegiant offers all Jet-Passenger service from America’s favorite

small cities to World-Class destinations

MISSION

Strategies

Use larger Aircrafts to provide nonstop service from small cities to direct leisure destinations

Only non-stop flight offered

No Frequent Flyer Programs

Maintaining low operational costs

Flights from airports which have limited or no service from mainline carriers to leisure destinations

Use of smaller/secondary airports, with the exceptions of some major ones.

Marketing to leisure passengers traveling to seasonal warm-weather destinations

Generating ancillary revenues in addition to ticket revenue

Strategies

Financial Strength 7/10Profitability & Growth 8/10

Stock Analysis: Hold

Financial Overview in 2012

Stock Repurchase in Oct 2011 at $46.61 for 2,462 by

employees ($44,933,570)Revenue increased 17% ($800M)Operating profits $85.4Net profits $49.4MEPS $2.57Cash balance $162M - $320MFirst time credit $125M in March

-Term Loan

2012 Highlights

Non-fuel unit costs increased 15%Maintenance/depreciation

Maintenance expenses increased 34%Major engine overhauls/repair

Operating earnings grew <600%!!! (since 2005)

Aircraft ancillary revenue

Expenses

Income Statement

Balance Sheet

Cash Flow

Current Economic Situation

DuPont Ratio “Wealth of Shareholder”

Debt to Equity Ratio “Risk Measurement”

ALGT(allegiant)/JBLU (JetBlue)/LUV (Southwest Airlines)

http://www.nasdaq.com/symbol/algt/stock-comparison

Industry Comparison

• $2.00 in December 2012 as a special dividend

• $0.75 in June 2010 as a regular dividend

• Restriction on cash dividend by Term Loan limits

Dividend “Distribution of Income”

Strengths

Low Cost Structure

- They fly from small airports

Crew member’s schedule

They obtained regulatory approval for extended over water operations to Hawaii

Weakness

No rewards program

Accidents and incidents

Flawed industry structure

Not much advertising

Threats

Fuel Costs

Future acts of terrorism

Larger competitors

Changes in government laws and regulation

Opportunities

Joint operations with regional travel locations

Investment in fuel storage units and fuel

transportation facilities

Possible Alternative Strategies

1. Market Expansion In Alaska

3 main important cities Anchorage, Juneau and Fairbanks

Going to warm-weather tourist destinations like San Francisco, Los Angeles, Las Vegas and San Diego

Possible Alternative Strategies

4.Joint venture with AvIntel and Lixar IT

In order to develop Allegiant System

Revolutionize the airline technology

Create a competitive Advantage

Possible Alternative Strategies

Pros:

1. Combating Increase Prices

2. Create a Win-Win Scenario

3. Reduce Risk of loosing money

Cons:

1. Create confusion on customer an risk brand loyalty

2. Instability of the market may create a loss by selling fix fares.

2. The Two Ticketing Option: A fixed and variable ticket

Possible Alternative Strategies

3. Implementing New Marketing Strategies:

1. Packages for college teams/organizations using Charter services

2. A unique customer service in the air

3. Brand awareness with social networks and social responsibilities

Recommended Strategy

1. Market Expansion In Alaska

3 main important cities Anchorage, Juneau and Fairbanks

Going to warm-weather tourist destinations like San Francisco, Los Angeles, Las Vegas and San Diego

Estimated cost: $960,000

Estimated Revenue: $555,000

Recommended Strategy

Market Expansion In Alaska

Pros & ConsPros: 1. It goes with the airline

target market2. 4th state with the highest

median household income: $66,000

3. Most airports are considered secondary

4. Air-travel is the most efficient form of transportation

Cons: 1. Climate difficulties2. Demand of the

market

http://www.bplans.com/airline_business_plan/company_summary_fc.php#.UL_8Fmhurdk

http://ycharts.com/companies/ALGT http://www.gurufocus.com/analysis/ALGT "MONDAY BUSINESS; TRAVEL BRIEFCASE; A Lot Of Vacation Time

In The U.S. Is Going Unused." (n.d.): 10. Web. 5 Dec. 2012.

Works Cited

Thank You