Allegiant defends new Boeing 737 MAX order

Allegiant Travel Thursday tried to ease concerns among investors that a plan to add 50 new Boeing 737 MAX planes to its fleet of used Airbus jets would drive up operating costs. The Las Vegas-based company, which runs an ultra-low-cost carrier, said the $5.5b jet deal was part of its long-term growth strategy and would result in more than $300m in savings. "Strategically, you can't be all used car," said CE Maury Gallagher told investors on a call. Allegiant's shares fell more than 8% on Wednesday after the company confirmed plans, first reported by Reuters, to buy 737 MAX 7 and 737 MAX 8-200 jets. Shares were up about 2% on Thursday. The Boeing order marks a stark change of approach by the fast-growing domestic carrier, which had previously relied mainly on used Airbus aircraft. The strategy to fly highly used, older Airbus aircraft has helped the company keep its costs low. Allegiant's cost per available seat mile - the standard measure in the industry showing what it costs to fly one seat one mile - is estimated to be at least 35% below the major airlines, according to CFRA Research. Analysts say a mixed fleet could increase its operating costs. Allegiant, however, said the annual ownership and fuel cost of the MAX planes is expected to be lower than its current fleet, and the new aircraft would generate higher earnings. The ultra-low-cost carrier aims to seize on post-pandemic leisure travel demand by adding more than 400 routes. It is looking to have more than 250 aircraft by the end of this decade.<br/>