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Stock Cheatsheet: Allegiant Travel

By Sean Sun - Updated Apr 6, 2017 at 11:41AM

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Your quick and easy guide to this low-cost airline company.

Study guides were the best part of high school: They hit the key points, summarized the main findings, and left out all the boring stuff. That's what a Motley Fool Cheatsheet is all about. If you're new to Allegiant Travel (Nasdaq: ALGT), consider this your Foolish way to get introduced and in the know in five minutes or less.

What Allegiant does
This airline has found a niche for itself by specifically targeting leisure travelers. The company has set up direct flight routes that connect 57 small cities to roughly 10 major recreational destination points (Las Vegas, Orlando, etc.). This allows Mr. and Mrs. Eugene, Ore., to embark on their honeymoon directly from their local airport, rather than waiting at an unfamiliar one to catch a connecting flight. On 128 of its 136 routes, Allegiant is the only nonstop provider.

How it stacks up
Allegiant believes that price is its customers' most important factor. To that end, the company is all about "unbundling the traditional airline product." The numbers seem to suggest that this strategy has worked. Based on two key industry metrics, revenue per available seat mile and cost per available seat mile, Allegiant extracts more revenue from its customers at a higher margin than any other publicly listed national airliner.

Airline

RASM

CASM

Difference

Allegiant

10.24

8

2.24

Southwest (NYSE: LUV)

10.56

10.29

0.27

JetBlue (Nasdaq: JBLU)

10.09

9.24

0.85

UAL (Nasdaq: UAUA)

10.81

11.05

-0.24

Delta Airlines (NYSE: DAL)

10.34

12.32

-1.98

US Airways (NYSE: LCC)

12.29

12.08

0.21

From company filings for the fiscal year ended 2009.

Why you should care
Allegiant owns a very profitable niche. Currently, the company doesn't have any serious direct competitors. Sure, other people own and fly airplanes, but a lemonade stand in Tampa isn't a threat to the juice bars in San Diego.

The airline industry is notoriously difficult to navigate, for both managers and investors alike. But Allegiant has proven to be an above-average company. As businesses like Wal-Mart and Nucor have shown, being the low-cost operator in a low-margin industry can be a very, very lucrative affair for shareholders.

Fast facts

  • Total number of aircraft: 46
  • Aircraft average age: 20.4 years
  • Load factor: 87%

If you want to learn more about disruptive niche companies like Allegiant, check out our premium growth and technology newsletter, Motley Fool Rule Breakers.

Fool analyst Sean Sun does not own shares in any of the companies mentioned. Wal-Mart Stores is a Motley Fool Inside Value recommendation. Southwest Airlines and Nucor are Motley Fool Stock Advisor picks. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.

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Stocks Mentioned

JetBlue Airways Corporation Stock Quote
JetBlue Airways Corporation
JBLU
$8.47 (-1.85%) $0.16
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$33.21 (-1.60%) $0.54
Southwest Airlines Co. Stock Quote
Southwest Airlines Co.
LUV
$38.34 (-1.89%) $0.74
Allegiant Travel Company Stock Quote
Allegiant Travel Company
ALGT
$104.20 (-6.32%) $-7.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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