Allegiant Air the most Profitable Airline despite being the least Fuel-Efficient

Posted by PITHOCRATES - September 21st, 2013

Week in Review

When people fly on vacation they’re about to spend a lot of money.  And a big cost is airfare.  Which they will try to book in advance to lock in some low prices.  This is what people think about when they are about to fly on vacation.  Not carbon emissions (see America’s greenest airlines by N.B. posted 9/17/2013 on The Economist).

IN THEORY, fuel efficiency should be a win-win proposition for airlines. Burning less fuel is better for the environment and the carriers’ bottom lines—fuel is generally their biggest single cost. That’s why one finding from a recent fuel-efficiency study is so surprising. In a new report (pdf), the International Council on Clean Transportation (ICCT) found that Allegiant Air, the most profitable airline on domestic American routes between 2009 and 2011, was also the least fuel-efficient airline during 2010.

…The upshot is obvious: according to the researchers, the financial benefits of fuel efficiency have not been enough to force convergence—”Fuel prices alone may not be a sufficient driver of in-service efficiency across all airlines…. Fixed equipment costs, maintenance costs, labour agreements, and network structure can all sometimes exert countervailing pressures against the tendency for high fuel prices to drive efficiency improvements.”

So if the bottom line cannot force airlines to be more fuel efficient, what can? The researchers suggest that airlines can start by making more data available to the public…Cars come with fuel-efficiency ratings, and appliances come with energy-efficiency stickers. Maybe flights should include that kind of data, too, so that concerned passengers can make an informed choice.

Allegiant Air is a low-cost no-frills airline that caters to people going on vacation.  And when you’re on vacation you are taking a break from worrying.  About the bills.  The job.  Even the environment.  You may drive a Prius back at home.  But for two 4-hour flights a year (to and from your vacation spot) you’re just not going to worry about carbon emissions.  Because you’re on vacation.

Allegiant Air flies predominantly MD-80s that sit about 166 people.  An MD-80 is basically a stretched out DC-9.  These have two tail-mounted turbojet engines.  The least fuel-efficient engines on planes.  But these turbojet engines are small and can attach to the fuselage at the tail.  Allowing it to use shorter landing gear.  These planes sit lower to the ground and can be serviced with the smaller jet-ways you see at smaller airports.  Where Allegiant Air flies out of nonstop to their vacation destinations.  People like not having to make a connecting flight.  And will gladly dump a few extra tons of carbon into the atmosphere for this convenience.

The Allegiant Air business model includes other things to help keep costs down.  They are nonunion.  They also fly only a few flights a week at each airport.  Allowing a smaller crew to service and maintain their fleet.  These labor savings greatly offset the poorer fuel efficiency of their engines.  The airlines that have unions (pilots, flight attendants, maintenance, etc.) all share something in common.  Recurring bankruptcies.  Which Allegiant Air doesn’t have.  Despite their higher fuel costs.

Fuel costs are an airlines greatest cost.  Especially for the long-haul routes.  Which burn a lot more fuel per flight than the typical Allegiant Air flight.  Which is why the fuel-efficient Boeing 787 is so attractive to them.  As they need to squeeze every dime out of their fuel costs as they can.  To offset their high union labor costs.  Those very costs that return a lot of airlines to bankruptcy.

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