Up in the Air: The Sustainability of Allegiant Air

Abstract

Low-cost airlines are convenient and often cheaper than their full-service counterparts. Costs are lower because fewer services are offered and consumers have lower expectations of their services. In this case study, students will be asked to analyze consumer expectations of the sustainability initiatives implemented by low-cost carriers; more precisely, do consumers have similar lower expectations regarding the sustainability initiatives that low-cost carriers implement? This case study focuses on one low-cost airline, Allegiant Air, and analyzes its sustainability initiatives as linked to the sustainable development goals (SDGs) outlined by the United Nations and specifically applied to the aviation industry. The findings conclude that Allegiant Air is doing well in regard to the financial and social SDGs but is lacking in the environmental actions. The 2020 COVID-19 pandemic and the reopening of this industry may be the opportunity to address sustainability issues and put new practices into place.

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Resources
Appendix A. Financial Records for Allegiant Air, 2014–2018
Exhibit 1. Income Statement (USD)

Report date

2014

2015

2016

2017

2018

Total operating revenue

1,137,046

1,262,188

1,378,942

1,511,203

1,667,447

Total operating expenses

1,423,988

890,486

1,006,375

1,280,573

1,423,988

Operating income

157,345

371,702

372,567

230,630

243,459

Total other expense

20,214

24,983

24,600

31,623

44,141

Income before income taxes

137,131

346,719

347,967

199,007

199,318

Net income

86,689

220,374

220,866

198,148

161,802

Source: Based on Allegiant Annual Report

Exhibit 2. Balance Sheet (USD)

Report date

2014

2015

2016

2017

2018

Cash

89,610

87,112

64,711

59,449

81,520

Accounts receivable

14,216

21,815

40,667

71,057

36,014

Expendable parts, supplies and fuel, net of reserve

16,980

15,583

16,797

17,647

19,516

Prepaid expenses

24,306

18,276

16,277

23,931

29,122

Total current assets

433,627

401,912

422,054

541,275

495,248

Property, plant, and equipment

738,783

885,942

1,095,314

1,512,415

1,847,268

Long-term investments

57,390

64,752

124,834

78,570

51,526

Goodwill

Intangible assets

Total assets

1,235,080

1,358,331

1,671,576

2,180,157

2,498,668

Taxes

Short-term debt

52,605

74,069

86,226

214,761

152,287

Accounts payable

13,232

6,801

16,010

27,452

20,108

Other current liabilities

296,117

314,267

290,662

271,783

341,601

Total current liabilities

361,954

395,137

392,898

544,295

513,996

Long-term debt

536,189

567,609

722,048

950,131

1,119,446

Total liabilities

941,015

1,008,326

1,197,954

1,626,846

1,808,347

Common stock

22

22

22

23

23

Retained earnings

395,783

573,619

753,397

907,943

1,025,061

Treasury stock

−325,396

−453,415

−517,803

−605,655

−605,037

Total equity

294,065

350,005

473,622

553,311

690,321

Total liabilities and equity

1,235,080

1,358,331

1,671,576

2,180,157

2,498,668

Source: Based on Allegiant Annual Report

Exhibit 3. Allegiant versus Rival Firms (USD)

2014

2015

2016

2017

2018

# Employees (full-time equivalent)

3,901

Net Income

86,689

220,374

220,866

198,148

161,802

Total operating revenue

1,137,046

1,262,188

1,378,942

1,511,203

1,667,447

EPS Ratio (Basic)

4.87

12.97

13.31

12.14

10.02

EPS Ratio (Diluted)

4.86

12.94

13.29

12.13

10

Sources: 2018 Annual Report http://ir.allegiantair.com/index.php/static-files/5a0d9d7d-2492-4d6b-a36e-684ebc851666; 2016 Annual Report http://ir.allegiantair.com/index.php/static-files/727b2dc0-3f18-4c48-943a-47622f7fa4d7; 2015 Annual Report http://ir.allegiantair.com/index.php/static-files/2f5ea5ad-7045-4855-9d5e-4163f951b47f

Appendix B. Early Numbers in 2020 Since COVID-19 Pandemic (Compared to March 2019)
Scheduled Service

March 2020

March 2019

Change

Passengers

892,966

1,484,326

(39.8%)

Revenue passenger miles (000)

839,766

1,386,501

(39.4%)

Available seat miles (000)

1,413,348

1,610,575

(12.2%)

Load factor

59.4%

86.1%

(26.7pts)

Departures

8,926

10,297

(13.3%)

Average stage length (miles)

914

914

(0.0%)

1st quarter 2020

1st quarter 2019

Change

Passengers

3,154,606

3,421,538

(7.8%)

Revenue passenger miles (000)

2,925,482

3,191,045

(8.3%)

Available seat miles (000)

3,964,009

3,802,132

4.3%

Load factor

73.8%

83.9%

(10.1pts)

Departures

25,484

24,344

4.7%

Average stage length (miles)

900

908

(0.9%)

Total System

March 2020

March 2019

Change

Passengers

898,986

1,499,688

(40.1%)

Available seat miles (000)

1,441,144

1,655,330

(12.9%)

Departures

9,172

10,660

(14.0%)

Average stage length (miles)

908

908

(0.0%)

1st quarter 2020

1st quarter 2019

Change

Passengers

3,175,450

3,450,278

(8.0%)

Available seat miles (000)

4,067,671

3,910,239

4.0%

Departures

26,312

25,200

4.4%

Average stage length (miles)

895

904

(1.0%)

*Total system includes scheduled service and fixed fee contract. System revenue passenger miles and system load factor are not useful statistics as system available seat miles include both ASMs flown by fixed fee flying as well as non-revenue producing repositioning flights used for operational needs. Fixed fee flying is better measured through dollar contribution versus operational statistics.

Source: http://ir.allegiantair.com/news-releases/news-release-details/allegiant-reports-march-2020-traffic

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