Allegiant is dedicated to maintaining low cost structure and their niche market approach and their unique diverse route network . Allegiant planes to reduce every day flying of aircrafts to reduce fuel costs even though the use of their MD 80’s has a high consumption of fuel.
Another way Allegiant manage to sustain their competitive advantage is by increasing their focus on key success factors, such as targeting the right customers. Allegiant airline focus on the ability to provide services where the major airlines do not, they do this by focusing on the leisure travellers and by offering nonstop flight so small airports. Allegiant does not offer connecting flights as this reduces cost and allows them to focus on a select demographic. Because of the competitive pricing scheme used by Allegiant, they have made it a difficult task for new and upcoming businesses to enter their market.
Another approach the airline uses is to offer added services such as low cost refreshments, however they also do not include add-ons in their ticket prices. These add-ons allow the airlines to take advantage of higher profit margins and the flexibility to increase and decrease in order to maintain competitive pricing in comparison to their competitors.
Three Major Issues
The Issue that we have allocated the most importance to is the variable cost control. Month by month leases are agreed by Allegiant as they pay to use airport employees on contracts which are short-term, so if the market fails to develop it can exit quickly. For example, a service from Columbia, South Carolina to Tampa ended just two months after it had started. This results in poor staff training and delivery of service, also loss of customer confidence. Allegiant also attempts to manage fuel cost by forward purchasing them in large quantities at the small traffic airports they target. This exposes them to risk of any fluctuation in fuel prices and no benefit if fuel prices decrease. Also with the rapid increase in fuel prices Allegiant were unable to increasing their ticket price fast enough to keep up with cost increase therefore resulting in lost revenue. The maintenance required for aircraft maintenance is significant. There are three main categories of maintenance costs, maintenance by aircraft engineers, staffing and managers, and computer system maintenance.…