There May Soon Be A New Kid On The Block

[Guest longtimer]

It will be interesting to follow this and see what, if any, effect there will be on prices.

http://canadianaviationnews.wordpress.com/2014/04/25/allegiant-airlines-eyes-canada-for-international-expansion/

Allegiant Airlines eyes Canada for international expansion
‎Today, ‎April ‎25, ‎2014, ‏‎2 hours ago | briandunnyyzGo to full article
Allegiant



Low-cost leisure carrier Allegiant Air is eyeing scheduled service to Canada as early as the winter of 2014, as the airline prepares to launch its first international service to Mexico in June.
The Las Vegas-based airline will likely begin flights to smaller cities in Atlantic Canada as well as Canada’s western regions from Florida, Allegiant’s vice president of network and pricing Lukas Johnson tells Flightglobal Pro. Potential Atlantic Canada airports include Moncton, Halifax and St John’s, he adds, saying that Allegiant is eyeing routes that airlines do not currently serve. “Obviously, you wouldn’t see us flying to Toronto Pearson International,” says Johnson. In line with Allegiant’s business model, the flights will bring travellers from these smaller Canadian cities to warm weather holiday destinations in Florida. The earliest the airline could launch these flights would be the winter of 2014, says Johnson. “We are not trying to do the bread and butter WestJet routes,” he adds, referring to the Canadian low-cost carrier. Allegiant currently has authority to operate charter flights to Canada and Mexico, and plans to begin its first international scheduled service to Mexico around June 2014. The airline has applied for approval to launch operations between Las Vegas and Hermosillo and San Jose del Cabo. Johnson says Allegiant has won approval from the US Department of Transportation to begin the flights but is still awaiting the go-ahead from Mexican authorities.
The airline is steadily growing its presence at Florida’s secondary airports, specifically Orlando Sanford, St Petersburg Clearwater and Punta Gorda. In August it outlined plans to add 16 new routes from Florida between October and December, bringing the airline’s total number of destinations from the state to more than 100. Allegiant’s east coast operations, which includes four airports in Florida and Myrtle Beach in South Carolina, accounts for around 40% of its total network now but this will go up to 48% in end-2014, says Johnson. At the same time, the share of its Las Vegas flights is gradually shrinking in its overall network, from 63% in 2007 to 29% in end-2014. This is due to rising airport costs at Las Vegas, he says.

[Maverick]

“We are not trying to do the bread and butter WestJet routes,”

Interesting statement for them to make.

[chockalicious]

Only a matter of time until Allegiant and Spirit are both operating in to Canada. I am still shocked that no US carrier is operating PSP-YYC.

[Super 80]

I heard a while back YEG to Florida would be their first routes.

[mrlupin]

Allegiant and/or Spirit, Canada would then have a low cost carrier...

[Thebean]

http://www.willallegiantbethere.org/

[Critter]

Once again, passengers will fly them because they are cheap, have a bad experience with all the hidden gotchas, complain to their friends, and do it all again.

Wash, rinse and repeat.

[inchman]

Once again, passengers will fly them because they are cheap, have a bad experience with all the hidden gotchas, complain to their friends, and do it all again.

Wash, rinse and repeat.

You forgot about the part where they transpose their memories of what carrier they were on to AC. That lets them justify doing it all over again next year, both to themselves and to their friends. I have been amazed by people who told me how horrible their experience was on AC out of Buffalo.

[Zan Vetter]

That's...ridiculous. Along the same line though, most people I know that use BUF do so with the preconceived notion that AC is too expensive. One neighbour was going to MCO, said she checked WJ, southwest, jet blue...I said what was AC's fare? "Oh I didn't even look I just assumed it was too much." This is a major problem, customers that don't even CHECK anymore. For the record, it was rouge and it was lower than WJ, and comparable with the BUF fares but for the taxes. They used SW.

[CanadaEH]

First bag fees.

[deicer]

It needs to be said again.....

[Zan Vetter]

We all know the score on Total Cost Of Travel; it's not just the fare. But culturally, people also like to be seen to be, how to put it, down to earth? It is very, very Canadian to want to fit in with the crowd. To wit, AC occupies in my mind the same market headspace as Starbucks. WJ and flying from BUF is Tim Hortons. Despite the measurable difference in quality and negligible difference in cost, millions of people have become conditioned to "prefer" Tim Hortons. Which to anybody, snob alert, who actually likes coffee, is ridiculous. I'm sure there is a market psychology PhD course that studies this phenomenon in depth but it is very real. How do you not even CHECK the price? That is the result of some powerful psychological forces.

People will fly Allegiant, no doubt. Will it be better value though is very much doubtful to me.

[Thebean]

http://www.willallegiantbethere.org/

Allegiant typically starts any new market with a 2x a week seasonal service.

Allegiant's, (and Spirit for that matter), ability to "oh my gosh" fares with the myriad of Canadian charges / fees / AIF's as well as other structural costs makes it pretty difficult to make the model work on a trans-border basis. There is no magic switch that turns off those costs.

Allegiant are notorious for arriving in a new market, but pulling out just as quickly. Loads may be big, but without ancilliary revenue, which amounts to, on average, about $47 per person per flight, the model doesn't work and they cancel flights / service pretty quickly. Their average fare in 1Q 2014 was US$146.51 + taxes on a 977 asl. WJ's was C$189.79 + taxes over pretty much an identical asl.

The moment any airline crosses the border into Canada, they incur all the wonderful costs associated with Canadian operations. In order to maintain margins when operating across the border, Allegiant's average all in fare will inflate from US$146.51 much closer to WJ's C$189.79 fare. Although they'll probably have a modest advantage, it won't be anything close to what they'd like it to be, or what consumers think it is. When it's all said and done, I'd be surprised if the differential was anymore than about $20 a seat.

Would Canadian consumer "all-in" pricing rules make it difficult for ancilliary revenue driven airlines to advertise as they'd like to?

From the Maritimes, Allegiant would operate only into Orlando Sanford, FLL, St Petersburg and Punta Gorda.

I think it's a safe bet that from the Maritimes, they wouldn't have much success with the latter two, and I'm not sure Canadians want to end up in Sanford starting their Disney Vacation. That leaves FLL. Unless they tag team with a Canadian tour operator, (who?), it's pretty doubtful they'd operate Canada to Mexico flights.

Add all the unfamiliar to Canadian consumers nickle and dimeing, the "several flights weekly" sched, poor otp performance and horrendous customer service issues when things go inevitably sideways and I have to wonder why they'd bother with Canada with all the other markets available to them stateside. The US has 10x the population of Canada, and because of the lower tax regime, a proportionally far, far higher pool of airline customers.

One can easily trace Allegiant's family tree back to Valujet, who briefly jumped into Montreal in 1995 and didn't last very long. I know their route planning guru and he said they were completely unprepared to deal with the differences between Canadian and US operations and customers.

What is often forgotten about Allegiant is that although a lot of the markets they operate into are unknown to Canadians and therefore seem pretty small, when one takes a look at the cachement areas, many of these markets are considerably bigger than numerous "Canadian-sized" secondary markets.

There are countless markets in the US with far better low hanging fruit potential than slugging it out with WJ. who have connectivity and feed out the ying yang, (very important in thin Cdn markets) and Cdn charter operators over the winter with their "several flights weekly" sun business.

Allegiant's latest city expansion was apparently Cincinnati in Feb 2014 with a metro population of 2.1m, about 10x the size of anything in the Maritimes, and with countless route possibilities on a year round basis due to far stronger community of interests between markets. Hmm. Cincinnati or St John's for a a few months a year with a couple of flights a week. Lemme think......

I'm not saying it won't happen one day, but I'm not as convinced as most that it'll be as successful as some suggest. There's absolutely no downside in Allegiant making noises about doing it. It's right out of SRB's play book.

[inchman]

Nobody said "non-stop". It seems to me that there is at least one other airline in Canada that is using one of the almost-similar semi-misleading words common in the airline business ("direct" vs "non-stop") to make it sound like people can get to a destination without stopping. Actually, Allegient didn't even use the word "direct", so their press release could be construed as being more "honest" from the average passenger's perspective.

All they have to do is get their passengers to "Montreal's US Airport" at Plattsburg (CTV Story here) or some other connection airport with US Customs and they can take people (if they're lucky) "fairly close" to anywhere they want to go in the US (and soon, Mexico), so range is not an issue, nor is point to point passenger volume.

I can see why YUL would have been a poor decision for any US carrier trying to capture the Montreal low price market. They were trying to attract price conscious customers and competing against themselves with side by side stores... one with higher landing fees, higher security charges and huge US Customs charges. The east coast has no such driveable options, so they may attract a bit more traffic until they piss off enough people.

[Thebean]

Nobody said "non-stop". It seems to me that there is at least one other airline in Canada that is using one of the almost-similar semi-misleading words common in the airline business ("direct" vs "non-stop") to make it sound like people can get to a destination without stopping. Actually, Allegient didn't even use the word "direct", so their press release could be construed as being more "honest" from the average passenger's perspective.

All they have to do is get their passengers to "Montreal's US Airport" at Plattsburg (CTV Story here) or some other connection airport with US Customs and they can take people (if they're lucky) "fairly close" to anywhere they want to go in the US (and soon, Mexico), so range is not an issue, nor is point to point passenger volume.

I can see why YUL would have been a poor decision for any US carrier trying to capture the Montreal low price market. They were trying to attract price conscious customers and competing against themselves with side by side stores... one with higher landing fees, higher security charges and huge US Customs charges. The east coast has no such driveable options, so they may attract a bit more traffic until they piss off enough people.

Valujet was in YUL long before any LCC's were in Plattsburgh.

[Thebean]

Spirit's average ticket revenue per passenger flight segment for the first quarter 2014 was $77.79 with total revenue per passenger flight segment of us$134.20 / c$147 on an ASL of 1,000 miles.

Any slip in the C$ just makes it worse, and is completely uncontrollable. Airlines hate uncontrollable.

WJ's avg pre tax fare was $189.60 on a 976 mile ASL.

Start adding the structural higher costs of operating into and within Canada and the difference between what one actually pays, (vs the perceived difference due to the low unbundled fare with about $62 of basically mandatory additional charges and then Cdn and US transborder taxes and fees after that), becomes far less substantial than most people think.

If Allegiant thinks LAS costs are high, wait 'til they get a load of Cdn airport costs.....

I'll bet the difference of "dollars removed from my wallet" for the entire trip on Spirit vs WJ, when push comes to shove, would be less than $10. There are countless opportunities Stateside where that delta, and therefore, the opportunity, wildly exceeds anything achievable north of the border.

Again, I'm not saying it won't happen eventually, but I'm not as convinced of the opportunity as others might be.

No airline has exclusivity when it comes to unbundling fares.