Allegiant CEO Greg Anderson thinks further industry consolidation will be critical in the low-cost space “with the rising cost environment,” he said during the airline’s first-quarter earnings call on Tuesday.
“I think consolidation or M&A … we’re all aligned that the industry needs less supply, particularly in the low-fare space,” Anderson stated. “Leisure fares have not kept up obviously with the rising cost environment. And clearly, there are some low-cost carriers [whose] models are struggling.”
Despite “broad economic uncertainty and decreased consumer confidence,” the ultra-low-cost carrier reported net income of $39 million and delivered one of the best operating margins in the industry.
Other ultra-low-cost carriers have fared less well, with Frontier posting a net loss of $43 million in the first quarter. After emerging from bankruptcy earlier this year, Spirit recently resumed trading on the New York Stock Exchange but has yet to report first-quarter results.
Allegiant M&A
Asked about consolidation on the Tuesday call, Anderson didn’t rule out M&A activity at Allegiant. Though he noted it “isn’t necessarily a requirement.”
“I think we still have a great model with great assets, network, the product set, the flexibility, and all that to continue to outperform in a downturn and emerge in a relative stronger position,” he added. “That said, our focus is and always will be to drive shareholder value and should – we should always be open to any opportunities that are in support of that.”
