July airline traffic numbers are in, and there's one that really stands out. Yes, the mighty Allegiant (ALGT) had a rough month. It makes you wonder what's going on over there. Were they holding out for a revenue bump and failed? Is there something else that we're not seeing?
It's important to keep this in context. As a leisure airline that flies only a couple times a week on most routes, it fills its planes early and easily. At this point, the expectation is that Allegiant will surpass 90 percent of its seats filled during just about every month, but especially during the peak summer season, right? Not in July.
July 2009 was already under the threshold with 89.6 percent load factor (a measure that closely resembles the percentage of seats with butts in them). In July 2010, it actually dropped to 88.1 percent. That's actually a fairly hefty decrease. Considering the year-to-date load factor is at 91.1 percent, this is a big difference for the airline.
So what could have happened? Well, it is the peak summer season, so maybe Allegiant tried to hold out for higher fares a little longer than it should have. Fares and load factor are highly correlated, of course. The higher you charge, the fewer seats you fill and vice versa. So maybe Allegiant thought it could squeeze out some higher numbers without pushing too many people off the plane. Its second quarter earnings were down, so maybe the pressure is building to boost those revenues.
I suppose we'll know for sure when third quarter numbers come out, but for an airline that relies on ancillary revenue for much of its money, a seat without a person in it is a real problem.
Here are the July traffic numbers from 2010 vs 2009. Available Seat Miles (ASMs) are a measure of total potential passenger capacity while Revenue Passenger Miles (RPMs) are a measure of actual passenger capacity. Load factor is RPMs/ASMs.
|US Airways#||1.9%||1.0%||-0.8 pts|
#Only includes wholly-owned regional subsidiaries
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