Allegiant investors punish airline for adding Boeing to fleet

Allegiant Airlines tumbled the most in 18 months after the carrier reversed its strategy of keeping costs in check by flying only Airbus SE planes, ordering 50 Boeing 737 Max jets. Under the deal, which has a total value approaching $2.5 billion, the airline will buy two versions of the Max to be delivered from 2023 through 2025, Allegiant Travel said Wednesday. The carrier has options to purchase an additional 50 aircraft. “The operating economics are terrific,” Allegiant CFO Greg Anderson said. “When we see the numbers, it makes a lot of sense. We drove a heck of a deal.” Allegiant has previously relied mostly on used or leased aircraft. Investors appeared anxious about the purchase, sending Allegiant’s shares down 8.8% to $176.12, logging the biggest drop since June 2020. Low costs are essential to support the airline’s model of offering heavily discounted, bare-bones fares while charging for items such as coffee and bottled water. Boeing and American depositary receipts of Airbus were little changed. Allegiant is taking 20 Max 737-8-200 models and 30 of the smaller Max 737-7. The Max 8 has a base value of $51m, according to Avitas. The aircraft appraiser doesn’t offer a going price for the Max 7, which hasn’t yet entered commercial service. Covering the cost of new planes typically means keeping them in the air as much as possible. That could threaten Allegiant’s practice of varying its flight schedule daily for demand, Savanthi Syth, a Raymond James Financial Inc. analyst, said in a note ahead of the order announcement. Adding a second fleet type also increases expenses for crew training and parts inventory. <br/>