Are we starting to see a decline in the demand for air
travel?
Allegiant Airlines seems to think so. The carrier revealed
it lost
$25.1 million in the third quarter, according to its earnings call, and
blamed much of it on a decline in the demand for travel.
It was better than last year, however, when Allegiant lost
$46.5 million in the same quarter.
In fact, looking at the overall picture, it was a flat
quarter for Allegiant compared to 2022. The airline made $565 million in
revenue in the third quarter, up a modest 1.4 percent from the $560 million it
made last year.
Perhaps it is a trend.
With the summer over, children back in school, and older
kids returning to college, this is historically a downtime in the aviation
industry. That is especially true for low-cost airlines that can’t handle the
ebbs and flows of air travel. Frontier Airlines, Spirit, JetBlue, and now
Allegiant have all reported third-quarter losses.
“Our variable-cost model gives us a competitive advantage as
we adjust capacity to the environment,” said Allegiant president Greg Anderson.
“Whether day of week, month of year, or route-by-route, our planning teams are
expertly matching capacity with leisure demand.”
Anderson added that the airline is taking a different
approach in this quarter, since it’s a more normal quarter.
“For instance, average aircraft utilization was seven hours
this summer,” he says. “Increasing that by even one hour would drive roughly
$50 million more in earnings.”
Again, the airline was relatively flat compared to the same
period last year. Total departures were down to 29,251 from 29,432 during the
same time frame a year ago.
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