Allegiant Airlines has come to an agreement with Scandinavian SAS to buy 13 more MD-80 aircraft for its fleet. Kind of a yawn announcement, isn’t it?

Allegiant uses the MD-80s and makes a strong profit doing so. They get praised for business model and frugal operating plan and deservedly so.

To a point.

Yes, the capital costs are extremely low. Yes, Allegiant can operate them with density that makes them profitable.

No, Allegiant can’t count on that working for the future. Airtran got started operating extremely old DC-9 aircraft and did pretty well for a time. Then its executives realized that fuel would be an issue and it started buying new aircraft. New, fuel efficient aircraft such as the 717 and 737-700.

Fuel and maintenance costs *will* become an increasing problem for Allegiant. Don’t kid yourselves. The MD-80 aircraft are strong but they are old and they have been ridden hard and put up wet by airlines around the world. That takes a toll.

The smarter move would be to start transition to the *next* cheap aircraft to buy. In my mind, that’s the 737-300. They’re only getting cheaper and they offer a pathway to continue on as an airline. Airlines will be dumping their older 737s in favor of the newest offerings and the older 737s such as the -300 will only get cheaper.

It also offers a pathway into a family of aircraft that can be purchased to fit a variety of needs.

The status quo can be great. But in this case, I think the status quo hurts Allegiant far more than helps in the next 5 years.

Filed under: Airline Fleets by ajax
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