Analysts, agents downplay impact of Allegiant report, SWA incident


The airline industry was hit with a one-two punch last week: A damaging "60 Minutes" report on Allegiant's safety issues was followed by a Southwest Airlines engine failure that resulted in a passenger death. Yet travel agents and industry analysts alike said those stories were not likely to have a significant impact on consumers' willingness to fly.

On the other hand, they said, some travelers drawn in by Allegiant's cheap tickets might think twice about going ahead with bookings on that airline. 

"The Southwest incident didn't have any impact on us," said Jay Johnson, president of Garden Grove, Calif.-based Coastline Travel. "It has not been brought up by any clients. I don't think that scares people."

He was less sanguine about the "60 Minutes" report: "When you hear about a specific carrier like Allegiant that has specific safety issues, I don't think it changes the perception of flying, but it definitely changes the perception of flying on that particular carrier."

The Southwest fatality occurred on an April 17 flight between New York LaGuardia and Dallas Love Field after a fan blade broke off in an engine, sending debris through an aircraft window. Passenger Jennifer Riordan was partially sucked out of the window and succumbed to head injuries. The fatality was the first in Southwest's 51-year history.

Riordan's death was the first caused by an accident on a U.S. airline since 2009.

CBS' "60 Minutes" aired its Allegiant expose on April 15, reporting that the carrier had experienced more than 100 serious mechanical incidents between January 2016 and October 2017. Allegiant, the news magazine reported, is three-and-a-half times more likely to have serious mechanical problems than other U.S. airlines.

While "60 Minutes" noted that many of those problems have occurred on old Boeing MD-80 aircraft, which Allegiant plans to phase out by year's end, the segment also included an interview with the head of the union representing Allegiant's pilots, who said that the carrier discourages pilots from reporting maintenance problems.

Allegiant, which has never had a crash, has called the report "a false narrative" and has accused "60 Minutes" of using biased sources.

"To suggest that Allegiant would engage in the practice of asking team members to violate company and regulatory obligations is offensive and defamatory," the carrier said in a statement last week.

Travel agents and analysts cited two reasons that they expect Allegiant to suffer more commercially from the "60 Minutes" story than Southwest will from actually experiencing a fatal mishap.

The first is that "60 Minutes" accused Allegiant of having a culture of lax safety oversight, as opposed to the more random nature of the Southwest engine failure. The second is that in contrast to Allegiant, which remains unfamiliar to many consumers, Southwest is a major U.S. airline that has built up a half-century of customer confidence and goodwill.

Seth Kaplan, managing partner for the newsletter Airline Weekly, said stock prices offered one clue to the more forgiving manner in which the public reacted to the Southwest fatality last week than it did to the "60 Minutes" expose. Southwest's stock price dipped 2.2% on the day of the engine failure but closed the next day higher than it had been the morning of the fatality. Allegiant's stock price, meanwhile, dropped 14% between April 13, when word got out that CBS was going to air the expose, and the market close on April 18.

"Investors are giving Southwest credit for a decades-long safety reputation," Kaplan said.

Indeed, said Richard Aboulafia, an aircraft industry analyst with the Fairfax, Va.-based Teal Group, "This is their first onboard fatality ever. That's incredible."

John Werner, president of the Mast Travel Network, is among those in the agent community who believes Allegiant is more likely than Southwest to be hurt by last week's events.

"We have members in central Iowa, and Allegiant has a lot of lift out of Des Moines," Werner said. "It definitely can affect business, and people might shy away from flying on airlines that are in the news in a negative way. And they might put off flying for a while."

Still, Werner and others said they did not expect to see a broad uptick in people who are hesitant to fly for safety reasons in response to last week's news.

Eric Hrubant, president of New York-based CIRE Travel, said last Wednesday, "I have not and will not see any business declines from anything going on this week."

Through the years, Hrubant said, the only issues or events that have significantly affected his business were the 9/11 attack by terrorists flying passenger jets into buildings and the SARS, Ebola and Zika virus scares.


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