August 7

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Tip of the Day – Allegiant Air’s biz model

By David Millay

August 7, 2019


Some of you may be surprised to hear this week that Allegiant Air is officially purchasing the naming rights to the new Oakland Raiders’ stadium in Las Vegas, only the third airline to have a naming rights deal at a major stadium.

Because of it’s status as a Ultra Low Cost Carrier (ULCC), many frequent travelers cringe when they think of a ULCC and customer experience. But you might be surprised to know that over the past 5-6 years, Allegiant usually boasts profit margins and returns on capital that are among the best in the industry.

This is because of their unique business model which allows flyers to have many different mini-transactions according to what’s important to them.

Allegiant can get away with this approach because of the type of customers it is targeting: leisure and discretionary travelers. “We’re not trying to be everything to everybody, which is what the rest of the industry has always tried to do,” says Andrew Levy, the former Allegiant Prez and United CFO.

For great customer service and hassle free experience, I’m willing to pay more. But there some are infrequent fliers who value different things, and for them, Allegiant has found a niche.

What do your customers value and how are you structured to serve them?

David Millay

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