Why Allegiant Shuffles Airports in Ways Most Airlines Wouldn't Dare
Earlier this week, Allegiant Air (ALGT) announced that its twice weekly flight from Idaho Falls to Los Angeles would move from Los Angeles to nearby Long Beach Airport. On the surface, the move is an odd one, but it's worth analyzing to understand the decision-making process for a move like this. In the end, I think I get it (sort of), but it's not the way that most other airlines would operate.
Allegiant started flying to LAX on May 1, 2009. Long Beach first received flights in July of this year when Allegiant obtained two daily slots that it could use. The rules in Long Beach are pretty clear. You have to start service within a certain amount of time when you win a slot award, and to keep that slot in your possession, you have to use it 30 times in any 60 day period.
The speculation had been that Allegiant would look to start Hawai'i flying at the airport, but the airplanes for the Hawai'i service aren't expected to be ready to fly that route until next year. It had to do something.
So to start service, the airline announced three weekly flights to Bellingham, Wash., and five weekly to Stockton just outside the SF Bay Area. I imagine that the Bellingham flights will do quite well as that's a gateway to the Vancouver area. But those Stockton flights have to be awful. That's a small market and the route is easily drivable by leisure travelers. So why fly it?
My guess is that it's purely an effort to utilize the slots until Allegiant has something better to do with them. It's a short flight and there's most likely an airplane with enough time on the ground to run it without impacting the schedule. With those eight weekly flights, Allegiant can hold on to the slots until something better comes along.
Imagine my surprise when I heard that Allegiant would switch its Idaho Falls flights from LAX to Long Beach. My initial thought was that the airline saw it as a better use of slots than Stockton. I figured Stockton would lose two flights a week, but that doesn't seem to be the case. The airline will instead run 10 a week, more than is necessary to hold the slots.
My next thought was that the flight was one of the laggards at LAX, so Allegiant thought it would do better with the lower cost structure in Long Beach. But that flight only went on sale on April 7 and started flying June 3. That's not much time to know if a route is doing well or not.
Is there some tie between Idaho Falls and Long Beach that makes it a much better market than LAX? I can't imagine so. I mean, that route, like most routes to Southern California on Allegiant, is focused on bringing travelers from the smaller city to the LA area. I can't imagine that Long Beach will be a bigger draw for the Idaho crowd. And Allegiant doesn't do corporate deals, so it's not going to be something along those lines.
I asked Allegiant about the rationale behind the switch, and I was originally told "it is operationally conducive to our plane availability and pilot schedules, more so then the current route to LAX." That's a lot of corporate speak, but wait, now it starts to make sense.
The current schedule is on an LA-based airplane. It leaves LAX at 955a, arrives Idaho Falls at 105p, leaves at 145p and comes back to LAX at 255p. There is also a roundtrip from Vegas on those days, but that's a separate airplane.
The new schedule will have the airplane start in Vegas and fly through Idaho Falls to Long Beach. The plane leaves Las Vegas at 1030a and arrives Idaho Falls at 120p. Then it leaves at 2p, arrives Long Beach at 310p, turns around at 350p, and is back in Idaho Falls at 7p. The plane then leaves Idaho Falls at 740p and gets back to Vegas at 820p. That opens up free time on the LA-based airplanes, so maybe they have something up their sleeve.
Why Idaho Falls and not some other route? Well, I followed up with Allegiant to get beneath the PR spin. That's how I got my answer.
Our pilots are only able to fly eight hours out of the day. So....[Idaho Falls] was one location that we are able to fly to/from [Long Beach] to/from [Idaho Falls] and to/from [Las Vegas] all within that eight hour window.So this really was a cost optimization effort. They have the plane in a good spot to run the service, and they can do it without an additional crew. But a simple cost-based move would be irresponsible. Allegiant would have to have done the revenue analysis as well. This tells me that the advance bookings haven't been that strong so far. It makes it easier to switch the flight in October and not anger existing customers when you have very few existing customers to worry about.
I still have to think that there will be a hit to the revenue side of the equation when the airline switches from LAX, but I'll assume it's done the math and expect the cost reduction to outweigh any reduction in revenue. It's a very interesting way to look at that route.
That's not the kind of thing that you'll find at most other airlines where the key is putting an airplane on the right route at the right time for the highest revenue travelers. Since Allegiant focuses on the leisure traveler that has few other options for nonstop travel at low prices, it has the ability to dictate when people fly. If costs can come down by moving airplanes around, Allegiant will do it. Others couldn't imagine doing such a thing.
Related:
- Allegiant's Unique Aircraft Order Highlights A Different Model
- Allegiant's Low Aircraft Ownership Costs Allow Schedule Flexibility
- Allegiant's Strategy In Its Own Words