Las Vegas-based Allegiant Travel Company,
the parent of Allegiant Air, plans to go public.
The company filed
a registration statement with the Securities and Exchange
Commission May 15 for a proposed initial public offering of its
common stock. The number of shares and price range for the offering
has not yet been determined, but Allegiant hopes to use the money
it would raise in part to pay for more expansion of its airline
service.
Allegiant is a
low-cost passenger airline that targets leisure travelers by
offering low-frequency service on all-coach MD80 aircraft from
small cities to prime leisure destinations. That currently consists
of service from 35 small cities to Las Vegas and Orlando (where it
flies into Sanford Airport), but Allegiant said has identified at
least 65 more small cities in the U.S. and Canada that fit its
business model.
Allegiant said
the expansion also could see the airline move beyond Las Vegas and
Orlando to add popular vacation destinations in the U.S., Mexico
and the Caribbean.
Allegiant sells
air fare on a stand-alone basis and bundled with hotel rooms,
rental cars and other travel-related services, which adds to its
ancillary revenue. In March, for example, it generated ancillary
revenue from the sale of more than 27,000 hotel room nights in the
Las Vegas market.
Allegiant also
increases its revenue by charging extra for assigned seats and for
bookings at the airport or over the phone; selling beverages,
snacks, inflatable travel pillows and Las Vegas and Orlando
souvenirs in flight; and by selling show and amusement park tickets
and nightclub passes.
As a result, in
2005 Allegiant generated $11.55 of ancillary revenue per scheduled
service passenger. That compares to an average scheduled service
fare of $93.53. Allegiant also benefits from fixed-fee flying
agreements with affiliates of Harrahs Entertainment and Apples
Vacations West.
In 2005,
Allegiant Travel Co. made a $7.3 million profit, with an operating
margin of 6.4% and a 46.6% increase in revenue to $132.5
million.
Allegiant does
acknowledge some risks, however. Those include its needs for more
airport gates in Las Vegas and Orlando to implement its growth
plan; its decision to fly with the older, less fuel-efficient MD80s
because it could acquire them at favorable rates; and the
possibility its non-union work force could decide to unionize and
demand higher pay and benefits and work rule changes.
Theres also the
risk that hotels and other travel suppliers, which have been
seeking to increase bookings via their own Web sites, could choose
to cease making their products and services available via
Allegiants distribution channels.
To contact
reporter Andrew Compart, send e-mail to [email protected].