Business Analysis on Allegiant Air
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Transcript of Business Analysis on Allegiant Air
Allegiant Travel
Ana Maria Llosa Nanaka Sakurai Jose SamayoaGabriel Zea
Background Information
Allegiant air was founded in 1997 under the name of West Jet Express
After a trademark dispute with Wet Jet Air they adopted the name Allegiant Air
December 2000 Allegiant filed to Chapter 11 bankruptcy protection .
June 2001 the airline was restructured to a low cost model and moved the headquarters to Las Vegas.
March 2002 they successfully exited the bankruptcy.
Low Cost Airline
Operated by scheduled and charter flights
Publicity traded company
Background Information
Air Routes
At Allegiant, travel is our deal!Allegiant offers all Jet-Passenger service from America’s favorite
small cities to World-Class destinations
MISSION
Strategies
Use larger Aircrafts to provide nonstop service from small cities to direct leisure destinations
Only non-stop flight offered
No Frequent Flyer Programs
Maintaining low operational costs
Flights from airports which have limited or no service from mainline carriers to leisure destinations
Use of smaller/secondary airports, with the exceptions of some major ones.
Marketing to leisure passengers traveling to seasonal warm-weather destinations
Generating ancillary revenues in addition to ticket revenue
Strategies
Financial Strength 7/10Profitability & Growth 8/10
Stock Analysis: Hold
Financial Overview in 2012
Stock Repurchase in Oct 2011 at $46.61 for 2,462 by
employees ($44,933,570)Revenue increased 17% ($800M)Operating profits $85.4Net profits $49.4MEPS $2.57Cash balance $162M - $320MFirst time credit $125M in March
-Term Loan
2012 Highlights
Non-fuel unit costs increased 15%Maintenance/depreciation
Maintenance expenses increased 34%Major engine overhauls/repair
Operating earnings grew <600%!!! (since 2005)
Aircraft ancillary revenue
Expenses
Income Statement
Balance Sheet
Cash Flow
Current Economic Situation
DuPont Ratio “Wealth of Shareholder”
Debt to Equity Ratio “Risk Measurement”
ALGT(allegiant)/JBLU (JetBlue)/LUV (Southwest Airlines)
http://www.nasdaq.com/symbol/algt/stock-comparison
Industry Comparison
• $2.00 in December 2012 as a special dividend
• $0.75 in June 2010 as a regular dividend
• Restriction on cash dividend by Term Loan limits
Dividend “Distribution of Income”
Strengths
Low Cost Structure
- They fly from small airports
Crew member’s schedule
They obtained regulatory approval for extended over water operations to Hawaii
Weakness
No rewards program
Accidents and incidents
Flawed industry structure
Not much advertising
Threats
Fuel Costs
Future acts of terrorism
Larger competitors
Changes in government laws and regulation
Opportunities
Joint operations with regional travel locations
Investment in fuel storage units and fuel
transportation facilities
Possible Alternative Strategies
1. Market Expansion In Alaska
3 main important cities Anchorage, Juneau and Fairbanks
Going to warm-weather tourist destinations like San Francisco, Los Angeles, Las Vegas and San Diego
Possible Alternative Strategies
4.Joint venture with AvIntel and Lixar IT
In order to develop Allegiant System
Revolutionize the airline technology
Create a competitive Advantage
Possible Alternative Strategies
Pros:
1. Combating Increase Prices
2. Create a Win-Win Scenario
3. Reduce Risk of loosing money
Cons:
1. Create confusion on customer an risk brand loyalty
2. Instability of the market may create a loss by selling fix fares.
2. The Two Ticketing Option: A fixed and variable ticket
Possible Alternative Strategies
3. Implementing New Marketing Strategies:
1. Packages for college teams/organizations using Charter services
2. A unique customer service in the air
3. Brand awareness with social networks and social responsibilities
Recommended Strategy
1. Market Expansion In Alaska
3 main important cities Anchorage, Juneau and Fairbanks
Going to warm-weather tourist destinations like San Francisco, Los Angeles, Las Vegas and San Diego
Estimated cost: $960,000
Estimated Revenue: $555,000
Recommended Strategy
Market Expansion In Alaska
Pros & ConsPros: 1. It goes with the airline
target market2. 4th state with the highest
median household income: $66,000
3. Most airports are considered secondary
4. Air-travel is the most efficient form of transportation
Cons: 1. Climate difficulties2. Demand of the
market
http://www.bplans.com/airline_business_plan/company_summary_fc.php#.UL_8Fmhurdk
http://ycharts.com/companies/ALGT http://www.gurufocus.com/analysis/ALGT "MONDAY BUSINESS; TRAVEL BRIEFCASE; A Lot Of Vacation Time
In The U.S. Is Going Unused." (n.d.): 10. Web. 5 Dec. 2012.
Works Cited
Thank You