On paper, Allegiant Air has never looked better.
Its second-quarter profits jumped 63 percent, the low-cost carrier announced last week, rising to $54.3 million. It accounts for just a sliver of U.S. air travel, but it’s one of the nation’s fastest-growing airlines. Its stock has soared to record highs, gaining 86 percent over the last year.
But the company has generated some negative headlines in recent months. Some Allegiant Air flights have had to turn back because of maintenance trouble, and in the midst of contentious contract negotiations, its pilots union is questioning the airline’s safety standards. In the first three days of August, two flights made emergency landings because of engine trouble.
And in the most dramatic incident yet, on July 23, a pair of company executives who oversee flight operations and safety took the helm of a flight from Las Vegas to Fargo, N.D., looking to get in some flying hours to keep their pilot licenses up to date. The plane left an hour late, and by the time it got to Fargo, the airport had closed to let the Blue Angels train there.
Allegiant says it thought commercial flights would still be allowed to land, but air traffic control disagreed, and in the mean time, the plane circled Fargo, burning fuel as the pilots and air traffic controllers worked out a landing. A controller asked if the Allegiant flight could land at another airport; the pilot said no. Could you wait 20 minutes to land? “Yeah, I don’t have 20 minutes,” the pilot replied.
A few minutes after dipping into reserve fuel, Allegiant declared an emergency and landed, launching a federal investigation, a flurry of headlines and questions about how an airliner ran so low on fuel. (The flight landed with 42 minutes worth of fuel left; commercial flights have to carry enough to fly an extra 45 minutes.)
Allegiant is a part of the fast-growing low-cost air travel business, which is expanding much faster than traditional airlines. It targets budget-conscious travelers with cheap fares (Las Vegas to Santa Maria, Calif., for example, costs just $35) to more than 100 cities along routes other airlines don’t usually fly. But even Allegiant officials have cautioned that the airline’s fast growth may need to slow.
“We don’t want to grow so fast that we get ahead of ourselves,” Jude Bricker, Allegiant’s senior vice president for planning, said in an interview. “We want all of our systems to be able to scale.”
Allegiant’s recent problems have drawn federal attention. The Federal Aviation Administration is investigating a “number of incidents” involving the airline, including the Fargo landing, according to spokesman Ian Gregor. Gregor said in an e-mail he wasn’t sure how many incidents involving Allegiant were being investigated, but the FAA looks into all episodes involving U.S. airlines.
Some of the incidents have been out of their control, said John Cox, an airline-safety consultant and former pilot, including a flight that was diverted when a bug crawled into a sensor. But the Fargo emergency landing raises more serious questions, he said, like why an Allegiant dispatcher cleared the flight to go to into closed airspace and why the plane didn’t have more fuel.
The recent string of diverted flights and emergency landings isn’t unusual and there hasn’t been an uptick in serious incidents, Bricker said.
But Bricker acknowledged that rapid growth can take a toll, as the airline is forced to buy more planes, hire and train more flight crews and set up operations at more airports. The airline has faced flight crew shortages that contributed to more delays than usual as the Las Vegas-based airline’s older MD-80 planes struggle through a hot Nevada summer, he said.
Speaking to investors last week, Bricker said the airline was debating how to balance its rapid growth with the pressure that places on its operations.
“The debate we’re having now is, there is no economic constraint to grow in the company. We have plenty of opportunity,” Bricker said. “We have markets we want to serve and passengers that we want to serve. It’s really about us balancing how quickly we can grow the airline with how much strain we can put on the operation.”
Chief executive Maurice Gallagher added that he was mindful of how rapid growth can affect the system. “You can push things like we’re doing this year,” he said, but he’d rather have steadier growth.
Allegiant is one of the country’s fastest-growing airlines, even though it accounts for only 1.3 percent of air travel in the United States. The number of people flying in the U.S. grew 3.2 percent in April, according to federal data; the number of people flying on Allegiant grew 13.2 percent.
The airline has carved out a lucrative niche, growing rapidly alongside other low-cost carriers like Spirit and Frontier, which have become increasingly popular – and profitable – in the United States by catering to leisure travelers with tight budgets and flexible plans.
Allegiant’s formula: save money by buying planes used and fill them to capacity with passengers looking for a deal. The average ticket cost $76.77 in the second quarter, before fees. No airline’s planes fly with fewer empty seats, federal data show.
It also flies routes most other airlines don’t, such as Youngstown, Ohio, to Myrtle Beach, S.C., hoping passengers will be drawn to the convenience, and shuts down routes quickly if they aren’t, sometimes within months.
“They don’t have a lot of patience for losing money,” said Bob McAdoo, a former airline executive and analyst at the investment bank Imperial Capital.
It has worked: The 18-year-old company hasn’t posted a quarterly loss in the last 12 years.
But the airline’s steady profits have drawn the ire of the Teamsters Union, which represents its pilots and has been locked into a years-long contract dispute with Allegiant.
The airline has dismissed that characterization a bargaining tactic, and Bricker said safety is “inculcated into the culture.”
“I think our safety record shows that,” Bricker said.