I have heard on the radio and read in the paper that Allegiant may have pulled out of ORH to show Wall Street that they can cut expenses in light of their upcoming IPO. Alot of existing companies that already have issued stock sometimes have lay-offs or close plants to show Wall Street and their investors exactly this. Companies, however, that have a pending IPO typically do not do this. Why?
Allegiant right now is trying to sell a business plan that a second tier airline can be profitable by flying from secondary airports to popular leisure destinations as a discount carrier. If anything they want to show investors that they are increasing their service area, not having to pull out of markets. Just remember Boston Chicken or Krispy Kream who kept opening store after store to create the illusion that they could not miss wherever they opened a store. If anything the ending of service in Worcester may send signals to potential investors that the Allegiant business plan is flawed.
In other words, the pending IPO actually may have actualy helped Allegiant to stay in Worcester. The bottom line is that Allegiant ended service to Worcester because 1) the loads were in the 75% range and 2) based on some of the comments that I have read the cost of fuel at ORH is higher then the other secondary airports that Allegiant served. We need to figure out why loads were this low (check out blog below entitled "Why Allegiant Failed?") and investigate whether or not ORH fuel prices are uncompetitive with other secondary airports.
Same Time Next Year
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It’s been nearly a year since I wrote about the problems that come from
having 11 bosses who are not on the same page about anything, as well as
suggestion...
4 months ago
14 comments:
Also figure in landing fees, personnel cost to run counter, baggage handlers, rent/lease counter space fee. Also fuel may have been charged at a lower rate for a commercial carrier.
If they are like most airlines, they don't buy their fuel in the individual cities, they buy it nationally and get a bulk rate. I don't think they are impacted by Worcester prices, just the cost of fuel in general and the long-haul to Florida.
Jim:
I was thinking the same thing but not sure.. Let me ask you this.
Since Allegiant's home base is Sanford, do they buy all their fuel there?? On a trip to ORH, fill the plan at Sanford with enought fuel to get to ORH and back??
Appreciate your help?
Bill, supposedly they cannot make it 2700 miles to Las vegas w/o a fueling stop??
Can they fly 2500 miles R.T. ORH to Sanford w/o only 1 fill up?
Jahn:
Good point.. Anyone?
Bill
If they are like any other airline,it does not matter where they buy their fuel. They pay the price they have negotiated nation-wide. It is not a Worcester or Sanford issue. Like the old saying "It's the economy" It is the "cost of fuel and the long haul". There is no way that plane could go both ways without fueling in both locations.
Jim:
Let me get this straight.
Allegiant negotiates with an FBO, which in the case of ORH is Swissport. No matter which airport they are at, they will get the same price from Swissport FBO.
For example, if Lehigh Valley has SwissPort Allegiant will pay the same price for gas at Lehigh Valley as they would at ORH. In other words the cost of fuel would not be higher then any other Swissport FBO.
Thanks
Bill
Inter-plane (IP) is fuel contracted at bulk rate by the airline. An FBO usually orders the fuel , stores it, and delivers it on behalf of the airline.
The FBO does not set the fuel rate in this case because the fuel is bought directly by the airline.
However the FBO can charge for delivery of fuel to the a/c, storage fee,etc.
Jim, do you know if the price of fuel is "one" fixed price at all locations or is it a fixed price per location. E.g. Fixed at 5.00 in Worc and $4.85 in Portsmouth?
And with fixed prices, i have to wonder who does the hedging, the airline or the fuel supplier? Providing a commidity at fixed price for future delivery usually requires entering the futures market.
Also, do you know if the fueling service is broken down, one charge for the fuel and another for the service (labor, etc) or is it one amt. for both?
I wonder if Allegiant locked in a good fuel price last Dec for the next 6 months and when June '06 arrived they lost their edge b/c they had to pay more for fuel?
Also, I am upset with the City representing to the community in late June that all is well with Allegiant and ORH.
I'll bet if most of us did that in our line of work it would be called something between misrepresenation to outright fraud.
They can debate the 75, 80, 90% load numbers (figures dont lie, but liars do figure) but last Junes dog and pony show up there leaves the City administration with mud on their face.
The FBO is just the guy that puts the gas in the tank. Allegint buys it form a supplier. It's not Swissport's cost that makes the fuel cost high. No matter what FBO is at an airport, the fuel cost is Allegiant's deal. This is all based on the concept that they operate as other airline do. I am not familiar with Allegiant's way of doing business. But, I would be surprised if it were any different than others. However, knowing that plane- it is expensive to operate it. The figures I hear seem in line. A long-haul is very expensive in this energy climate.There would be differences in bottom-line price from one city/ state to another based on taxes levied.
Jim:
One last question. It is fair to say that the cost of fuel for Allegiant at ORH, Lehigh Valley or Portsmouth is relatively the same per gallon?
Thanks
Bill
As i said before, gas is different in all states and some cities because there are taxes/fees etc. Base price for Allegiant should be the same. Other things such as taxes are individual. Not sure how else to say it.
Swissport charges to pump the fuel.
ORH charges a 'flowage fee'.
The city of Worcester charges a 5% tax
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