Allegiant is an Airline Again, New CEO Says

The discounter has wanted to diversify its revenue for a long time. It has yet to work. Now, it's reverting to basics.

Dear readers,

Every few years, executives at Allegiant Travel Company tell us that we should not call their employer an airline, while they explain (and at times argue with investment analysts) that there's more money in other businesses — including family fun centers, a golf course management system, and a sprawling resort hotel in Florida — than in shuttling people in Fargo, Chattanooga, and Fort Wayne to Orlando and Las Vegas. But these side projects never go as planned, and management eventually returns to the core airline.

Once again, Allegiant has reached a pivot. Greg Anderson, who has worked at Allegiant since 2010 (most recently as its president) took over as CEO on Sept. 1 with a mandate to boost the airline’s margins. He replaced Allegiant’s iconoclastic and visionary founder, Maury Gallagher,¹ who returned for a one-year stint as CEO after John Redmond (who shepherded the disastrous hotel project) resigned.

In an interview last week, Anderson told me he's spending little time on the company's Sunseeker hotel project near Fort Myers. He is instead letting Allegiant's hotel experts run it, along with the outside advisers hired to improve the hotel’s profitability and/or sell it. We’ll have to wait until Allegiant’s Oct. 30 earnings call to find out how much money the hotel lost in the summer quarter, but given what Anderson told me (yes, you’ll need to read beyond the paywall for that), it’s not looking good. We previously learned the company expects the hotel to have a $25 million EBITDA loss for 2024, as it runs at a projected 40 percent occupancy rate.

So we have come full circle: Allegiant again is an airline that is doing airline things.

"We're going to focus, we're going to execute, and we're going to get back to being the Allegiant that you know," Anderson told me. "From my perspective as incoming CEO, I am really focused on restoring industry-leading profitability here at the airline."

Focusing on the airline is probably a good idea. My sources tell me that many insiders encouraged Redmond and Gallagher to do this years ago. Some of those insiders, my sources told me, decided to work at other airlines when they realized management was not in the mood to consider differing opinions. The detractors told me that Sunseeker was a distraction that would divert attention and money from an airline that was doing well and had growth opportunities. They also pushed back on Redmond's assertion that the airline could use its customer database to push customers to buy air and hotel packages.

I give Allegiant credit because it failed fast. The resort opened last December and it’s already not top-of-mind for the new CEO. The remarkable thing is that the airline, albeit less profitable than before the pandemic, remains in good shape. Its brand still resonates in smaller communities throughout the United States, and for people in underserved markets, Allegiant often provides the best combination of price and schedule for popular vacation destinations.

I spoke last week with Anderson (one of my subscribers) to learn about his plans for Allegiant: he told us his view on the future of the hotel, how the airline plans to fly its 737 Maxes (which apparently were very cheap), and why Allegiant’s team realized before the pandemic that even its customers want premium products.

Read on for the good stuff.