Allegiant Air Is Not Concerned About Breeze Airways
Highly-anticipated startup Breeze Airways has revealed few details about its anticipated operations. However, when it finally launches operations,…
Highly-anticipated startup Breeze Airways has revealed few details about its anticipated operations. However, when it finally launches operations, Allegiant Air’s executives are not concerned about the added competition from the carrier. Instead, the airline is focused on its expansion plans and emboldened by a strong balance sheet.
Allegiant Air is not worried about the competition
On Allegiant’s first-quarter earnings call, CEO Maurice Gallagher was asked about the growth of low-cost competition in the US. In his comments, he specifically spoke about Breeze Airways:
“While we’re certainly going to pay attention to people, that’s not [the] first thing we look at this point in time. With the Breeze side of the house, they have an ambitious growth schedule, but with their airplane size and some things, I’m not terribly concerned about flying against a 110-seat airplane, which they’ll start with. The A220 is a good airplane, but they claim to be interested in longer-haul thinner markets. So, we’ll just have to wait and see.”
John Redmon, President of Allegiant, followed up with his own thoughts on branding:
“I think when you look at it, we’ve never been afraid of competition. But, financially, where we stood some time ago versus where we stand now, Maury stated in his comments, we all kind of alluded to it, but we’ve never been stronger with a stronger balance sheet in history of the company, frankly. So we’re well-positioned to take on anyone. When you look at the start-ups, they – literally – don’t have a brand. No one knows that brand in the marketplace. So, they’re coming in as a brand that no one’s ever heard of, and as Maury points out, maybe with a plane type that’s not as cost effective as ours in some cases. So, I think we’re very comfortable with where we stand, going forward.”
Breeze Airways versus Allegiant
Breeze Airways is the brainchild of David Neeleman, who is best known for setting up JetBlue. The airline plans to fly point-to-point using Embraer E190/E195s to start and then move toward the Airbus A220-300.
Breeze is looking at a plethora of routes and markets. It wants to focus on point-to-point, low-cost travel between secondary cities. Allegiant also flies a similar model, with a focus on connecting leisure passengers. As an ultra-low-cost carrier, Allegiant has focused on offering a no-frills product and selling ancillaries to its customers.
Breeze Airways has yet to detail its full model and slate of offerings. While it wants to be low-cost, that model comes in many different varieties.
Allegiant and Breeze likely will not compete too much. According to Mr. Neeleman, 80% of Breeze’s routes will have no competition this summer. Of course, those routes have yet to be revealed, and plenty of airlines have made new route announcements since his statement.
Allegiant is focused on its low-frequency, low-utilization model that has helped it be successful. It sees plans to grow and is stepping on the gas in 2021 as most of the larger airlines in the US focus on repairing their balance sheets, rebuilding their schedules, and reactivating their aircraft.
The interesting play in the market
Mr. Gallagher’s airline is in a great place and has big plans moving forward. For him, the more interesting play is the big three US airlines, as he stated:
“I think the really interesting play is how do the Big Three react […] they’ve got a ton of debt. Their cost structure is twice what any of ours are. I just don’t know how those guys kind of come down the hill – not to say they won’t – but long term.”
He went even further, stating:
“I think you’re going to see the ULCC side able to really gain a lot of market share, potentially, over the next couple years. And that’s what we are so bullish on because we can really stand alone in what we do and how we’ve done it.”
The big three in the US refer to American, Delta, and United. The three major network airlines have all taken on new debt since the crisis started to shore up liquidity, and they have a lot of work to do.
Allegiant does not traditionally compete heavily with these three airlines. However, as all airlines are mainly oriented toward capturing leisure travelers, there is more and more overlap between the airlines. Allegiant has so far held its own, and it believes it can hold its own moving forward.
Whether it be Breeze Airways or the big three US airlines, Allegiant Air is ready to face the competition, and it believes it will win.
What do you make of Allegiant’s view toward Breeze Airways and the big three US airlines? Do you think Breeze Airways is a threat to Allegiant? Let us know in the comments!