Allegiant Air purchases 50 new Boeing 737 MAX as part of strategy change



The first Boeing 737 MAX 7 is unveiled in Renton, Washington, United States on February 5, 2018. REUTERS / Jason Redmond

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SEATTLE, Jan.5 (Reuters) – Low-cost U.S. airline Allegiant Air on Wednesday confirmed plans to purchase 50 new Boeing (BA.N) 737 MAX jets worth $ 5.5 billion at list price as part of a change in supplier and strategy as it prepares for a post-pandemic tourism rebound.

The order marks what an analyst, reacting to the purchase plans first reported by Reuters on Tuesday, called a radical change in approach from the fast-growing national carrier, which previously relied mainly on used Airbus aircraft.

Allegiant “has had one of the strongest recoveries for US airlines,” wrote Jefferies analyst Sheila Kahyaoglu, adding that the order is evidence of post-pandemic confidence in leisure travel “vastly outclassing business trips “.

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The Las Vegas-based carrier will purchase 30,737 MAX 7 and 20,737 MAX 8-200, making it the launch customer for the larger variant in the United States, CFO Greg Anderson told Reuters on Wednesday.

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

The deal is a boost for Boeing Co after two key medium-haul customers, Qantas (QAN.AX) and several Air France-KLM subsidiaries (AIRF.PA), switch to Airbus (AIRF.PA) in December.

“With this agreement and these new MAX aircraft, it will provide the opportunity to expand on 400 additional routes,” said Anderson.

He declined to name the city pairs targeted as part of the expansion, but said the planes would increase the number of seats and save 20% in fuel compared to Allegiant’s older Airbuses.

Boeing shares rose 0.5% in pre-market trading. Shares of parent airline Allegiant Travel Co were down 0.7%.

So far, Allegiant has mainly relied on older planes to keep costs down – a strategy that allows it to use some jets less intensively and attack sparsely populated roads, with some planes not flying more. twice a week, according to Jefferies.

Analysts at Raymond James said this approach is well suited to what is expected to be an “unstable recovery”, but cautioned against operational inefficiencies caused by a mixed fleet.

Allegiant currently operates 110 Airbus A319s and A320s and will continue to purchase A320s in the used market, Anderson said. It has around 50 aircraft – 20 A320s and 30 A319s – that it may have to retire over the next decade.

Wednesday’s expansion is the latest sign of growth among “ultra-low-cost” carriers who combine rock-bottom fares with optional charges. Such carriers are expected to emerge in a position of relative strength from the COVID-19 pandemic.

“Our bookings are larger than they were in 2019,” Anderson said, referring to travel levels before the pandemic.

Yet like many airlines, Allegiant has expressed uncertainties over fuel prices, labor and supply chain issues, and mounting inflationary pressures.

Mexico’s Viva Aerobus announced in December a business alliance with Allegiant to offer flights between the United States and Mexico. Read more

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Reporting by Eric M. Johnson in Seattle; Additional reporting by Nathan Gomes in Bangalore and Tim Hepher in Paris; Editing by Richard Pullin and Mark Porter

Our standards: Thomson Reuters Trust Principles.


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