Allegiant Counters an Industry Trend
The airline has major growth planned for 2025. But executives say there is a good reason for the extra seats.
Dear readers,
Even if this Justice Department is unlikely to pursue a major antitrust case against U.S. airlines for colluding to reduce capacity growth so they can maintain pricing power, I've noticed airline executives rarely (if ever) say the words, "capacity discipline" on earnings calls. That pointed talk got them into trouble a decade ago, when government lawyers asked if they had used the phrase to signal competitors.
Still, after many U.S. airlines were burned in 2023 and 2024 by aggressive growth and falling prices, executives have found other ways to suggest that all airlines would be better off if every carrier maintained prudent growth rates. Most have gotten the message — even ULCCs like Frontier.
Allegiant is a major exception. While its competitors tested the limits of revenge travel over the past three years, Allegiant added little capacity (it blames Boeing for some of that)1. Now, it wants to catch up.
On its fourth quarter earnings call earlier this month, Allegiant said it expects to grow scheduled service capacity by 14 percent in the first quarter, and 17 percent for the full-year, both year-over-year. The Allegiant I covered from 2012-2020 often grew capacity by double-digits, but on the call, Allegiant executives told investors that they had exceeded 1.5 percent growth (year-over-year) in only two of the last 10 quarters.
"Pre-pandemic, you'd have to go back to 2011 to find the last year without a single quarter over 10 percent ASM growth," said Drew Wells, chief commercial officer. “The planning team is ecstatic to have some flexibility and freedom in deploying capacity once more.”
Aren’t analysts spooked?
Some seem to be, judging by their skeptical questions and research reports.