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Innovation

How one airline managed to profit 10 years in a row

Allegiant Air has turned a profit for 41 consecutive quarters by flying where other airlines won't go.
Written by Tyler Falk, Contributor

Allegiant Air doesn't fly out of Atlanta's Hartsfield-Jackson airport or Chicago's O'Hare, two of the busiest airports in the world. Instead, the U.S. airline frequents places like Bloomington, Illinois, Grand Forks, North Dakota, and Kalispell, Montana. Not exactly major airport hubs, yet the airline has been profitable for over 10 years and an impressive 41 consecutive quarters.

How is that possible? Allegiant thrives on maintaining routes in places the rest of the airline industry doesn't go. While many routes from other airlines have been cut from small airports, Allegiant entices travelers from smaller cities with low-cost, non-stop service to major tourist destinations -- Florida, Las Vegas, and Niagara Falls, for example -- and then peddles everything from hotels to tickets, gaining commission from the sales. And, of course, there's lots of fees, the Associated Press reports:

Passengers face fees for almost every service and amenity imaginable. At Allegiant, fees for checked baggage and changing an itinerary — which are common on many airlines — are just the beginning.

The Las Vegas-based airline charges extra to book flights online, or to use a credit card. Selecting a seat in advance costs $5 to $75 each way, depending on the length of a flight. Even a bottle of water costs $2.

Flying Allegiant isn't glamorous. While other airlines tout new aircraft with Wi-Fi and TVs in every seat, Allegiant buys old planes to avoid hefty aircraft loans. And to pack in as many passengers as possible, its seats don't recline. But for small-town Americans with limited flight options, these inconveniences are worth it for a few days of sunshine.

So while the rest of the airline industry is barely profitable, averaging a $4 profit per passenger (actually, not bad for the industry), Allegiant had a profit margin last year of 14.6 percent, as its net income grew 59 percent from 2011 to 2012.

So here's our lesson for the day, as Andrew Levy, president of Allegiant Travel, puts it to AP: "Typically, the best way to make money is not to compete with somebody."

With only 17 of its 203 the company's routes flown non-stop by other airlines, Allegiant is proving that point.

Quirky Allegiant Air hits jackpot on small-town America [Associated Press]

Photo: Flickr/InSapphoWeTrust

This post was originally published on Smartplanet.com

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