Case
Teaching Notes
Supplementary Resources
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.
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2023 Sage Publications, Inc. All Rights Reserved
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
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2023 Sage Publications, Inc. All Rights Reserved
