MIAMI — Last week, Ultra-low cost carrier (ULCC) Allegiant Air announced a major expansion of its route network, as the Las Vegas-based airline will add twelve new routes and three new destinations this fall.
The headlines include additions at primary hubs Newark and Denver, a sizable departure from Allegiant’s normal modus operandi of operating leisure routes from secondary, tertiary, and truthfully almost quaternary U.S. airports. The full list of new routes planned by Allegiant is as follows:
To/from Newark Liberty
Ogdensburg will cater to Canadian snowbirds
Allegiant will also launch service to Ogdensburg, New York, a tiny airport (with a total annual passenger traffic in the 8,000-10,000 range) whose current air service is limited to less than a daily service to Albany and Boston on 9-seat Cessna 402s operated by Cape Air.
Ogdensburg is a town of 11,000 in upstate New York perched right on the Canadian border, and in that sense is right up Allegiant’s wheelhouse.
Truthfully, the primary driver’s of Allegiant’s new flights to Fort Lauderdale and Orlando-Sanford will be Canadian snowbirds looking to escape the bleak northern winter, as Ottawa and Montreal are an hour and two hours away by car respectively.
This kind of border low-cost travel has weakened since 2014 due to the Canadian Dollar’s slide in value against the US Dollar, which makes normally cheaper U.S. airfares more expensive in real terms for Canadian residents.
The fundamental driver of high Canadian airfares due to unreasonably high departure taxes and passenger facility charges (PFCs) at Canadian airports remains in place, but the currency effect means that the relative attractiveness of U.S. airfares has been reduced.
But Allegiant is likely cheap enough that it represents a major discount even adjusting for currency effects.
Allegiant has increasingly moved into primary airports
Since it was founded in 1997, Allegiant built itself into the world’s most profitable airline (operating margin – Q1 2016) on the back of flying low frequency routes targeted at vacationing travelers in secondary and tertiary markets.
Even before rivals Spirit Airlines and Frontier Airlines recast themselves as ULCCs citing Ryanair as inspiration, Allegiant was the first US carrier to adopt Ryanair’s strategy of low frequency routes at smaller airports. Indeed, outside its initial home base of Las Vegas, Allegiant’s primary destinations were places like Bellingham, Casper (WY), Idaho Falls, and Ogden (UT).
Even when Allegiant entered major markets like Orlando, Phoenix, or Columus, it served the secondary hubs in those cities like Sanford, Mesa Gateway, and Rickenbacker.
But as the airline’s growth exploded from the middle of the last decade to the present, Allegiant increasingly found itself starved for growth opportunities in the traditional flotsam and jetsam airports.
There are only so many Missoula’s or Wilkes-Barre’s out there before you run out of second tier U.S. airports with enough demand to support a weekly flight or two to Orlando or Vegas.
And so today in Allegiant’s network, you not only see major spoke airports like Austin-Bergstrom, Cincinnati-Northern Kentucky, or Pittsburgh (the latter two are Allegiant bases with 14 and 7 routes apiece), but primary hubs like Los Angeles, Baltimore-Washington, Fort Lauderdale (arguably West Palm Beach would fit the old Allegiant best in South Florida), and San Diego. And now Denver and Newark are joining that list, the latter with four routes.
Allegiant is starting to look like the TUI Group
Ryanair too underwent a similar transition over the same timeframe (remember today it has massive bases at Athens, Barcelona El Prat, Madrid, and Rome-Fiumicino), but to extend the European analogy, Allegiant seems like it is evolving over time to look a lot like the TUI Group of airlines.
While Ryanair, EasyJet, and Wizz Air increasingly serve a mix of vacation, visiting family and relatives (VFR), and business travelers, the TUI Group remains laser focused on the first of those three segments.
Its various airline brands, including Thomson Airways (in the UK), Jetairfly (in Belgium), and TUI Airlines Netherlands operate from primary hubs like Manchester, Brussels, and Amsterdam, flying both short haul and long haul vacation routes.
In that sense, we wonder whether Allegiant’s future is to be the TUI to the Ryanair or WizzAir of Spirit and Frontier in the U.S. market.
It already more or less mirrors those airlines’ short haul operations and has dipped its toes into longer haul flying with its 757s that ply routes to Hawaii. While this is still several years down the line, we wonder if the next step in Allegiant’s evolution is to buy used 767s or A330s and begin flying vacation-oriented long distance flights to Europe and South/Central America.