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Americas’ tailwind

The North American low cost airline scene seems stronger than ever, and increasingly crowded with carriers generally bullish about their prospects over the coming year, Alan Dron rounds up
 
In what will be seen as good news for the low cost and ultra low cost sectors generally, Spirit’s CEO Ted Christie commented on the ‘stronger industry pricing’ reflected in the carrier’s recent full-year results. Moreover, the company expects the business environment to improve further this year. Christie noted that the company had introduced several revenue enhancements, including a new website with more merchandising capabilities.
 
In an example of the ever-increasing importance of ancillary revenue to LCCs, Spirit anticipates it will make $56 in ‘non-ticket revenue’ per one-way segment/passenger in 2019. The CEO is confident that Spirit can increase its aircraft utilisation in peak periods, which is typically when it captures higher-than-normal revenue. Demand remains strong on both domestic US and international routes, which helps explain why Spirit aims to increase its capacity by around 15% in 2019.
 
Several of Spirit’s new international sectors are still ‘spooling up’, according to Christie, but should be operating well by summer. That increasing demand can be seen in the continuing ramp-up of Spirit’s fleet. Having taken delivery of seven aircraft in 2018 to bring the fleet numbers to 128 A320 Family members by year-end, a further 16 are scheduled to join over the coming year.
 
However, an RFP (request for proposal) for new aircraft is out with industry at the moment and CFO Scott Haralson has said that Spirit is not wedded to Airbus. An order is anticipated around the middle of this year. The airline remains focused on domestic leisure destinations and large gate-constrained metro airports, ‘as this is where many leisure customers have otherwise been priced out of the market live, and where many leisure customers want to go’, said Haralson. Orlando and Las Vegas have been particularly good leisure destinations for Spirit over the past two years, but large conurbations such as Houston, Chicago, Dallas and Newark have also shown healthy demand.
 
The number of international routes on Spirit’s network has risen over the past year or so from 10% to around 15% and, according to CCO Matt Klein, they bring in a healthy amount of ‘visiting friends and relatives’ (VFR) traffic. VFR traffic means many of Spirit’s passengers are carrying one or more pieces of baggage, contributing to ancillary revenues. Despite the generally buoyant market, Allegiant Travel Company, parent of LCC Allegiant Air, had a less profitable year in 2018, seeing an 18.3% drop in net income to $161.8 million, due to a combination of higher fuel costs, and the completion of an 18-month fleet transition to the Airbus A320 Family from its former MD-80 inventory; the latter initiative having involved significant one-off costs.
 
However, the move to a single-type fleet is expected to bring efficiencies in the coming year, as well as advantages in fuel efficiency and the benefit of the larger capacity of the European type. Las Vegas-based Allegiant ended the year with 32 A319s and 44 A320s, and expects to add six and 11 of those models, respectively, this year. Allegiant focuses on linking travellers in small cities to leisure destinations. Remarkably, it has no competitors on 75% of its 431 routes, and has identified a further 600 routes for possible growth. Denver-based ultra low cost carrier (ULCC) Frontier Airlines also continues to grow its fleet and route network.
 
Currently it operates 80-plus Airbus A320 Family aircraft, with a large chunk of the 430-aircraft order for A320neo and A321neo ordered by parent company Indigo Partners destined to wear its colours. Indigo holds substantial shareholdings in three other ULCCs – Mexico’s Volaris, Hungary’s Wizz Air and Chile’s JetSMART – and the order will be spread among them. Frontier continues to announce large batches of new routes, with more than 30 announced since the start of the year.
 
Early this year it removed one cloud from its horizon by agreeing a five-year pay deal with its pilots after more than two years of fractious negotiations and federal mediation, which saw the Air Line Pilots Association take the company to court, arguing that the latter was indulging in bad-faith bargaining. It dropped its case after an agreement in principle was reached last November.
 
Alaska Airlines is also ramping up its number of destinations. On 19 February the airline launched daily nonstop services between Seattle-Tacoma International Airport and El Paso International Airport, along with daily nonstop service between El Paso and San Diego International Airport. 
 
"We've considered adding El Paso as a new destination for some time," said Nicholas Haan, Director, Network Planning at Alaska. "We're very pleased to be able to connect two of our West Coast gateway cities – Seattle and San Diego – to such a vibrant Texas city.” El Paso is currently the largest underserved market from Seattle within the range of Alaska’s Embraer 175 jets. >>
 

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