Allegiant Air Announces New Bases in Time for Winter Travel

Allegiant Air announced today that the airline will open two new bases at the Mesa airport outside of Phoenix, and the Fort Lauderdale airport in Florida. Allegiant’s Phoenix service will begin October 25, and their Fort Lauderdale service on November 14.

While Allegiant will likely be successful in both cities, because the volume of the traffic for both these markets is so great, each market will present its own challenges. Phoenix is a hub for Southwest and US Airways, and fares in the markets are already quite low. US Airways already offers service from Phoenix to some of the smaller markets that Allegiant serves, and US Airways has been known to be a difficult competitor. Moreover, Allegiant will be serving the Mesa airport, which is 45 minutes to an hour outside of downtown Phoenix. The facility may be convenient for some individuals visiting Phoenix’s Southern suburbs, but for those going to Phoenix or points north, flying Southwest or US Airways may be a time-saver, even if customers have to drive to a larger airport for their departure.

However, the Mesa airport does have one advantage: it has virtually no commercial airline traffic, so the airport is much less crowded than Sky Harbor, creating a more pleasant experience for customers used to hassles at larger airports. Compare that with Fort Lauderdale which has seen exponential growth in the past five years, and the facilities at the airport haven’t been able to keep up. Allegiant may find it challenging to offer significantly lower fares in some markets where there is overlap between the Allegiant and its competitors. This is worse for Allegiant on the East Coast because Allegiant often runs into competition from low-fare carriers like AirTran and JetBlue who can match Allegiant’s fares.

And that’s part of the problem, Allegiant has been running into increased competition lately, and I predict that the airline will have a difficult time avoiding other competitors, especially in Fort Lauderdale. The airline pulled out of a route between Newburgh, NY and Orlando, primarily due to new competition from JetBlue and AirTran. Allegiant may find that its expansion opportunities are limited because Fort Lauderdale is served (albeit with connections) from many smaller markets by legacy and low-fare carriers alike. And carriers with connections will not only match Allegiant’s fares, but they will also offer perks like in-flight entertainment and complementary snacks.

And even if a smaller market isn’t directly served from one of Allegiant’s bases, a competitor may serve a nearby market that has overlap and hurts Allegiant’s chances of success. It seems that West Palm Beach might have been a better choice since it has a similar catchment area, less congestion than the Fort Lauderdale airport, lower costs, and less direct competition.

However, Phoenix and the Miami/Fort Lauderdale area are probably the best markets Allegiant had available for new bases. The Florida market hasn’t been saturated, and it’s becoming increasingly popular for East Coast travelers as an alternative to cities out West. While there are other base opportunities out East, including Myrtle Beach, Gulfport, and even New York City (during the peak summer travel season) that Allegiant will I’m sure explore in the future, Fort Lauderdale was the most predictable choice.

Phoenix was also a good choice, given the massive size of the market and it’s potential growth in the next five to ten years. Allegiant may open new bases in Los Angeles, San Diego, or Reno in the future, but given the size and growth potential of the market, Allegiant was right to add Phoenix now.

However, I expect Southwest, JetBlue, and AirTran all to react strongly to Allegiant’s decision. As these low-fare carriers have difficulty finding new markets to expand to, they are expanding to smaller cities, and they are starting to touch Allegiant’s turf. These carriers don’t have to compete directly with Allegiant (at the same origin airports), they just have to be in similar markets. Since Southwest, JetBlue, and AirTran have a more developed reputation than Allegiant, more amenities, and more frequent flights, they are more attractive to the majority of travelers than Allegiant is. While Allegiant still has its niche, it may have to enter smaller and smaller cities in order to maintain it, and that adds risk and uncertainty into what is already a very risky industry.

Allegiant’s next route (to/from Phoenix) will be announced next Thursday, August 9.