Vegas carrier sees big expansion on horizon

By Richard N. Velotta / Staff Writer

Passengers board an Allegiant Air jet in Fort Collins, Colo. Staff File Photo

Allegiant Air, the Las Vegas-based air carrier that specializes in packaging vacations to local resorts from small-town USA, will nearly double in size in the next two to three years with plans to serve 70 cities.

President and Chief Executive Maurice Gallagher made the projection this week at the Airport Revenue News' second-annual airport revenue conference at Caesars Palace, where he was a guest speaker.

The conference brings together airport managers and a variety of products and vendors designed to generate revenue for airports and provide diversions for people spending time between flights.

If Gallagher's projections are on the mark, Allegiant would surpass Southwest Airlines in the number of nonstop destinations served and challenge US Airways for offering service to the most destinations from McCarran International Airport.

US Airways, which formerly operated in Las Vegas as America West Airlines, and its regional express affiliate currently offer flights to 67 destinations, the most by any carrier.

But the number of cities directly served from Las Vegas is about the last similarity between Allegiant and its rivals.

Gallagher said Allegiant's motto, in fact, is "We don't do business," a reference to the airline's focus on serving the leisure market.

Allegiant currently has flights to 37 cities with its fleet of 20 MD-80 series jet aircraft. Because the airline focuses its attention on small communities and not big cities, the market is virtually wide open and Allegiant has very little competition.

Gallagher figures there are about 130 small cities with airports capable of serving Allegiant's jets.

"These small cities have a total population of 100-plus million people hungry for air service, so that's quite an opportunity," he said.

He said that while Allegiant isn't a household name nationwide, "our name is recognized by the people in Sioux Falls" and other cities where the airline is the only scheduled air service they have.

Gallagher said his company goes into a market as "shameless hustlers," exploiting showgirl and Elvis icons in advertising and promotional material. The arrival of the airline is generally treated as front-page news in community newspapers that circulate in those cities.

When serving the leisure market, price is the key to filling Allegiant's planes. As a result, Gallagher said tickets often cost less than what the nation's top discounters charge. The airline can offer the low fares by packaging trips with resorts and flying only when demand is high. Since most people like to get away for weekend trips, Allegiant has very few Tuesday and Wednesday flights.

Gallagher also said the airline charges for some things passengers get for free on other airlines. On Allegiant, it costs extra to select a seat on a flight, to make a reservation with an agent instead of online and for soft drinks on board. Gallagher said many airlines are moving toward that trend.

Ryan Air, a discount operator in Europe, for example, has begun charging a fee for checked luggage.

Like other airlines, Allegiant struggled last year to cope with the rising cost of fuel, and Gallagher said it would be important to control costs in the future.

"The whole industry will figure it out or we will die," he said.

Gallagher was critical of airports that turned their fuel concessions over to contracted vendors. He said Allegiant has passed on serving some cities because an independent vendor priced fuel too high to make it affordable for the airline to go there.

Other aviation leaders joined Gallagher in the opening session.

James May, president and chief executive of the Air Transport Association, said fuel costs are now the top concern for an industry that has survived the devastating effects of the 9/11 attacks and the outbreak of SARS in the past decade.

"The patient is fragile, but the patient is recovering," said May, who said it was no coincidence that the cost of fuel has risen $9 billion a year for the nation's airlines and those airlines together lost $9 billion last year.

On the horizon, May said his association and the industry would have a voice in the rising cost of airport security and concerns about reforming the nation's air traffic control system, which he said is cluttered and outdated.

"This is a system that was designed in the '40s and depends on radar and analog voice communication technology," May said.

Speaker Mike Boyd, an aviation consultant with the Evergreen, Colo.-based Boyd Group, said the next competitive battleground in the airline industry will be among low-cost carriers that will continue to scrap for market share. He expects airlines such as Southwest, JetBlue, US Airways and AirTran to become more competitive with each other and he said aggressive competition explains why Southwest, an airline that vowed it would never fly to Denver because of high airport costs, began service there earlier this year.

Because of the battle among the low-cost carriers, Boyd expects legacy carriers such as American, Northwest and Continental to be good bets for growth. He also expects Chinese air carriers to partner with legacy carriers to help transport Chinese tourists to the United States, Latin America and South America.

Randy Walker, director of the Clark County Department of Aviation, welcomed conventioneers to the city and said McCarran International Airport is about a month away from unveiling "SpeedCheck Plus," a system that will enable tourists to check their bags for their flights at their hotels before leaving for the airport.

He said the system would be rolled out first at the Venetian.

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