Things in the Sky

Allegiant Air continues to reduce its plans for growth this year, according to a capacity guidance released on Friday. The carrier says that available seat miles (ASMs) in the second quarter for its scheduled services will be anywhere from 4% lower to flat compared to the same quarter last year.

This update compares to a prior forecast of flat to 4% growth. The carrier first provided capacity guidance for the second quarter in December. At that time, the company estimated that capacity would grow from 6% to 9%.

Of course, airlines (and all companies for that matter) are going to update forecasts as more recent data becomes available, but it is significant that Allegiant has essentially reversed course for the second quarter.

The guidance was part of Allegiant’s news release of February traffic. The carrier saw traffic dip by 1.3% on its scheduled service, but the decrease was outpaced by a 3% capacity cut. As a result, load factor increased 1.6 points to 93%. Allegiant estimates that unit revenues for scheduled service increased between 13.7 and 14.1% in February.

Allegiant will be presenting at an investor conference today, and it will be interesting to see what insight is added.

One would assume these capacity cuts are driven by fuel prices. I wonder…is Allegiant more exposed to fuel risk than other carriers? Obviously a fleet of MD-80s isn’t exactly the most fuel-efficient, but the majority of their passengers are traveling for leisure purposes. If consumers rein in discretionary spending due to higher prices (driven by commodity increasing prices), how will Allegiant be affected?

Obviously I’m just openly speculating here, but I’m interested.