Friday, January 29, 2016

Allegiant Air says it's working to improve aircraft 'reliability'

Allegiant Air leadership told financial analysts late Wednesday that the airline is working to alleviate "operational challenges" that include the need to increase the reliability of part of its fleet.

In a conference call with analysts after the Las Vegas-based airline released its fourth-quarter financial results, Allegiant's chief operating officer Jude Bricker said the airline's operational issues are an offshoot of its rapid growth.

"We are taking a lot of new airplanes and they have been slow to come up to the fleet average reliability and we will still work through those issues the remainder of the first and second quarters" of 2016, said Bricker, referring to planes that are "new" to Allegiant that the company actually buys used. The airline does not acquire brand new aircraft.

Bricker also noted one other problem is the airline's ability to train pilots.

"We continue to struggle with crew availability as our training pipeline tries to catch up with fleet growth," he said, according to a transcript posted by

That may be Allegiant's first public explanation of what it meant this month when it said the abrupt resignation of former COO Steve Harfst was an "opportunity to refocus on operational needs." Officials did not detail what exactly they meant by reliability.

The last year has been Allegiant's most-profitable ever. But the airline has also coped with a series of highly publicized maintenance issues, including emergency landings caused by everything from engine failures to smoke generated by faulty air-conditioning systems.

Since Allegiant operates older aircraft that require more maintenance than newer planes, its flights are sometimes delayed as mechanics make repairs.

But the airline's CEO, Maurice Gallagher Jr., indicated to analysts that these "operational" issues are a fact of life at all airlines and do not equate to Allegiant being unsafe.

"As I tell our people, the systems are set up to deal with problems," Gallagher said. "When you have people and machinery, you are going to have issues with those and a safe environment … allow for those to be anticipated and corrected accordingly. … We have invested tremendously in safety systems over the last few years."

But Allegiant officials told analysts they have seen no correlation between operational issues and airline revenue.

"Certainly, fourth quarter revenue was not affected by fourth quarter operations," Bricker said.

Allegiant's financial results showed the airline's profit margin in the quarter was near 30 percent, a level that would certainly make it one of the most profitable airlines in the world. Allegiant's 24 percent profit margin at one point last year was tops globally.

Allegiant reported net profits of $56.7 million last quarter on revenue of $310.9 million. That was up from $4.7 million for the same period last year. The company reported adjusted net profit of $113 million for the entire year.

"We are reporting our best fourth quarter ever after our best year ever," Gallagher said.

Gallagher and other Allegiant officials have accused the airline's pilots' union, the Teamsters, of drumming up unfounded safety concerns about the airline as a tactic in protracted negotiations over an ongoing contract.

One consequence of Allegiant's rapid expansion is that it will have to start reporting flight delay statistics to the federal government starting in 2017. Smaller airlines are exempt from the requirement.

Allegiant carried about 95 percent of the record 1.6 million passengers at St. Pete-Clearwater International Airport last year and is viewed by tourism officials as a vital cog in Tampa Bay tourism. Allegiant serves 49 cities from the Pinellas airport, and will add the 50th in June when it begins flights to New Orleans.


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