Jetrader - Summer 2016 - 12

Q&A

Allegiant Air's
Tom Doxey
VP of Fleet and
Corporate Finance
By Cody Smith
Tom Doxey currently works as Allegiant Air's Vice President of Fleet and Corporate Finance,
making efforts to streamline the airline's business model and predict the trajectory of the
industry. Jetrader spoke with Doxey to find out how Allegiant keeps its costs so low, the
airline's plans for fleet upgrades, and acquiring vs. leasing aircraft.
Jetrader: At a recent ISTAT event, you
spoke about Allegiant's cost of ownership structure and how that allows the
company to compete in the ultra-low-cost
carrier segment of the market. Can you
comment on Allegiant's strategy now and
moving forward?
Tom Doxey: One of the key components
of our business model is the ability to fly
our aircraft economically only at those times
of year and on those days of week when
demand is already high (a Sunday in July)
and not flying at times when demand is low
(a Tuesday in September). The lower cost
of ownership associated with our aircraft
allows Allegiant to be simultaneously low
cost and low utilization, which is unique in
the industry. The result is an average daily

utilization of about six hours per day per
aircraft. By way of comparison, our unit
costs are similar to those of Spirit, but Spirit
achieves its low unit costs by flying higher
fixed cost, lower variable cost aircraft at a
higher frequency (about 13 hours per day).
Our low fixed cost base provides us a high
degree of flexibility to adjust to changes in
the economy, fuel costs, or other factors.
JT: What is Allegiant's plan for fleet
upgrades? How will you balance the cost
of updating inventory with the low-cost
fare structure?
TD: We currently operate a fleet of 49
MD-80s, five 757s, and 29 A320 family aircraft. We have announced that the 757s will
be retired by the end of 2017. The MD-80s

12 The official publication of the International Society of Transport Aircraft Trading

are also being retired, and we are targeting
sometime around the end of the decade to
be fully out of that fleet. In addition to the
29 A320 series aircraft currently in operation, we have another 36 aircraft committed to deliver over the next several years.
We are constantly evaluating additional
A320 acquisition opportunities. Ultimately,
we would like to be at approximately 100
A320 series aircraft by about the end of the
decade. There will be incremental capital
required to fund the fleet transition and
our monthly aircraft ownership cost will
be somewhat higher. However, there will
also be cost improvements in areas such as
fuel burn. Overall, the operating economics
of the A320 are such that Allegiant will
be able to maintain its unique low cost
structure, which ultimately allows us to
offer low fares to our customers.
JT: Talk about maintenance costs and why
Allegiant's are lower than competitors.
TD: Our unitized maintenance costs are
average for the U.S. industry. There are
many factors (such as fleet age, operating environment, fleet types, maintenance
contract structure, timing of maintenance
events, etc.) that go into a particular airline's cost structure in this area of the
business. Like other airlines, Allegiant
maintains its aircraft per regulations that
are ultimately approved and overseen by

Jetrader - Summer 2016

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