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Southwest beware: the meaning of Allegiant adding BWI

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Allegiant is starting to augment its small town-to-Las Vegas/Orlando model.

The most intriguing network expansion in the US announced by an airline so far in early 2016 is Allegiant Air’s move into Baltimore/Washington International Airport (BWI), planned for this spring. Two worthy notables: 1) The Las Vegas-based ultra low-cost carrier (ULCC) is staking a claim at Southwest Airlines’ US east coast stronghold; the original LCC has around a 70% market share at BWI. 2) BWI-Cincinnati, one of the routes Allegiant will be operating, is decidedly NOT a route featuring a small, regional market at one end and a leisure destination at the other end, which has long been Allegiant’s calling card.

Allegiant has been profitable for 51 straight quarters (likely to be 52 when its fourth-quarter 2015 earnings are announced) and has only had one real recent failure: its ill-fated attempt to fly 757s to Hawaii, an endeavor on which it is pulling the plug this year. That likely has spooked Allegiant from pursuing beyond-continental US expansion. So where will Allegiant’s expansion come from?

Allegiant has so far been immune to the major carrier price-matching that is bedeviling fellow ULCCs Spirit Airlines and Frontier Airlines—simply because, unlike Spirit and Frontier, it does not attempt to compete on routes dominated by big US airlines like American, Delta, United and Southwest. That’s not likely to change. But Allegiant appears to be making two alterations—or additions—to its strategy of flying from markets like Bismarck, North Dakota to leisure markets like Las Vegas and Orlando. That strategy will surely still be Allegiant’s bread-and-butter: cheaply taking folks in small towns to vacation destinations.

But BWI indicates two strategic additions:

1) Filling in network “gaps” not served by Southwest and other big US airlines. The one thing the six destinations Allegiant plans to serve from BWI (Cincinnati, Savannah, Tulsa, Asheville, Knoxville and Lexington) have in common: none are on Southwest’s network.

2) Targeting underserved medium-size market to medium-size market routes. Last year, Allegiant started serving Austin-Cincinnati and indicated it is interested in connecting non-major markets that aren’t served—or are only served via high-fare itineraries requiring connections and trips aboard regional aircraft.

Don’t expect Allegiant to start going head-to-head with American, Delta or United—or even Spirit, Frontier or Southwest. But it is starting to augment its small town-to-Las Vegas/Orlando/San Diego model by looking for the gaps in the US domestic airline network. Given that it does not operate daily service and is flexible on what days it flies (BWI-Cincinnati, for example, will be 2X-weekly and not always on the same days every week), these new routes are somewhat low-risk for Allegiant.

Allegiant is basically saying: Hey, if you need to get from Baltimore to Cincinnati to visit Grandma and don’t really care what day you fly, then we’ll get you there directly, cheaply and without flying aboard a regional aircraft. (Though you will be flying aboard an older, used MD-80 or an older, used A319/A320). How big of a market is there for these types of travelers? Allegiant wants to find out.

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