Allegiant Air buys 50 new Boeing 737 MAX jets in strategy shift

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SEATTLE: U.S. low-cost provider Allegiant Air confirmed plans on Wednesday to purchase 50 new Boeing 737 MAX jets price $5.5 billion at record costs in a swap of provider and strategy because it gears up for a post-pandemic rebound in tourism.

The order marks what one analyst, reacting to buy plans first reported by Reuters https://www.reuters.com/enterprise/aerospace-defense/exclusive-us-carrier-allegiant-air-buy-50-boeing-737-max-jets-sources-2022-01-04 on Tuesday, known as a stark change of method by the fast-growing home provider, which had beforehand relied primarily on used Airbus plane.

Allegiant “has skilled one of many strongest recoveries of U.S. airways,” Jefferies analyst Sheila Kahyaoglu wrote, including that the order is proof of post-pandemic confidence in leisure journey “vastly outperforming company journey.”

The Las Vegas-based provider will purchase 30 737 MAX 7 plane and 20 737 MAX 8-200 plane, making it the launch buyer for that bigger variant in the United States, Chief Financial Officer Greg Anderson instructed Reuters.

It will take supply of 10 of the jets in 2023, 24 in 2024, and 16 in 2025, he added in an interview on Wednesday.

The deal is a lift for Boeing Co after two key medium-haul prospects, Qantas and several other associates of Air France-KLM, switched to Airbus in December.

“(*50*) this deal, and these new MAX plane, it should present the power to develop into 400 extra routes,” Anderson mentioned.

He declined to call metropolis pairs focused underneath the growth however mentioned the planes would add seating capability and 20% gas financial savings in comparison with Allegiant’s older Airbus plane.

Boeing’s shares have been up 1.3% in noon commerce whereas the inventory of airline father or mother Allegiant Travel Co fell greater than 8%.

Colin Scarola, vp at CFRA Research, reckons that the Boeing order might undermine Allegiant’s value benefit as differential and blended fleet tends to consequence in “vital” working prices.

Scarola mentioned the order additionally means that market stock may be depleted for the much-cheaper extremely used planes the low-cost airline usually likes to purchase.

MIXED FLEET

Allegiant has till now relied primarily on cheaper second-hand planes to scale back prices – a strategy that enables it to make use of jets much less intensively and assault thinly populated routes, with some planes flying not more than twice per week, in response to Jefferies.

Raymond James analysts mentioned this method is properly fitted to what is predicted to be a “uneven restoration” however warned of the operational inefficiencies attributable to having a blended fleet.

Allegiant at the moment operates 110 Airbus A319s and A320s and can proceed shopping for A320s in the used market, Anderson mentioned. It has some 50 plane – 20 A320s and 30 A319s – that it might have to retire over the approaching decade.

Analysts mentioned the deal for new jets pointed to an aggressive supply from Boeing whereas consultants have mentioned Airbus stays hampered by excessive components prices for the A220, one other kind examined by Allegiant. Boeing has denied slashing costs to win offers.

Wednesday’s growth is the newest signal of development amongst “ultra-low-cost” carriers that mix rock-bottom fares with non-compulsory prices. Such carriers are anticipated to emerge in a place of relative energy from the COVID-19 pandemic.

“Our bookings are larger than they have been in 2019,” Anderson mentioned, referring to pre-pandemic journey ranges.

Still, like many airways, Allegiant has voiced uncertainties over gas costs, labor and provide chain issues in addition to mounting inflationary pressures.

Mexico’s Viva Aerobus in December introduced a industrial alliance with Allegiant to supply flights between the United States and Mexico.- Reuters



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