Allegiant details cost savings with A319s

Washington DC
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Low-cost carrier Allegiant Air expects to gain incremental income of $1 million per aircraft annually for the Airbus A319s that it is introducing into its fleet, as the mainly Boeing MD-80 operator plans future long-term growth around the Airbus A320 family.

The Las Vegas-based airline announced today that it will add 19 A319s to its fleet through 2015. Nine of these, now operated by EasyJet, will be taken on eight-year operating leases from GE Capital Aviation Services. The remaining 10 A319s will be on five-year capital leases from Philippine low-cost carrier Cebu Pacific.

EasyJet's A319s will be about eight to ten years old at the time of delivery, and Cebu's A319s will be about seven years old, says the carrier today in a call to discuss the aircraft acquisitions. Deliveries of the A319s will begin in the fourth quarter of 2012 and will end in the second quarter of 2015. Allegiant expects to put the first two aircraft in service in the second quarter of 2013.

All 19 aircraft are configured with 156 seats and four exit doors each, and Allegiant does not expect to make any major changes to the aircraft,

With the new A319s entering Allegiant's fleet, the airline will retire two MD-87s in the first and second quarter of 2013 respectively. These two lone MD-87s in Allegiant's fleet have 130 seats each, fewer than the number of seats on Allegiant's MD-82/83s.

Allegiant operates 56 MD-82/83s currently and is in the process of adding 16 seats on each of these aircraft to take the total number of seats on board to 166. Currently, 26 aircraft have undergone the seat additions. The airline also has four 223-seat Boeing 757s in service and will have another two in service in the first quarter of 2013.

Calling the MD-87s the "oddball" aircraft of the fleet, Allegiant's president Andrew Levy says they are no longer economical in the current fuel environment and have upcoming expensive maintenance checks.

The airline, however, has no concrete plan to retire any of the MD-82/83s in the near future, he adds. "We expect the MD-80s to be the workhorse of the fleet, and we are not running away from that," says Levy. But the airline will not be adding more MD-80s, says the carrier's chief executive Maurice Gallagher, who anticipates the airline's future growth to be with current generation narrowbody aircraft.

"We're not saying we will be doing A319s all the time, we might do A320s," he adds.

Justifying the addition of the A319s, Allegiant says today that a used A319 is projected to cost $96 per passenger compared with $106 for a 166-seat MD-80. The calculations were made with the assumption of an aircraft utilisation of 8.9 hours a day.

Levy says there are no plans for increased fleet utilisation, but flying a more fuel-efficient aircraft will allow "certain routes" to be profitable.

Having the A319 will also allow the carrier to save on maintenance costs compared with the MD-80, he adds.

While most low-cost carriers have emphasised a strategy of sticking to a single aircraft type in order to save on costs, Allegiant's executives maintain that adding the A319 to its MD-80 and 757 fleet was a carefully thought-out decision.

"We have a pretty good understanding of what this airplane does and how it makes sense to bring it on board. We've done a lot of intelligence, and we are going into this with our eyes wide open and a grin on our faces," says Levy.

Gallagher points out that Allegiant's network is "different" from other low-cost carriers with its simpler scheduling. While pilot training for the A319s is expected to cost the airline money, he says that the airline "can't operate MD-80s for the next 20 years".

"We have to bite this bullet at some point... the MD-80 is a great airplane but it has 30-year-old technology, he adds.