Memo: Allegent Air date 5 November 2013
From: Lord Northampton, Chairman and chief executive
To: Robin Banks, senior Airline analyst
Questions to be addressed.
I have received your memo providing background information about allegiant.
Following our meeting , these are the points and issues your next report must Address:
1. What is the strategy and business model of allegiant air? What makes the airline special? How is the composition of the current fleet related to the way allegiant conducts its business?
2. What are the underlying prospects for allegiant air in terms of traffic growth and how big is it likely to be In terms of RPK and a number of employees in 2015 and 2020?
3. What is your opinion about the composition of the current fleet?
4. How can allegiant Air be successful using old aircraft when many other airlines are moving towards acquiring new, fuel efficient types?
5. Is Allegiant’s president correct to suggest that the operating costs of old MD-80s are as low s more modern aircraft type?
6. Using the GGGF Nutcracker 1B spreadsheet, explore the effects of different fuel prices , lease rates , MRO costs and aircraft utilizations and you report on your finding.
7. It is understood that factors other than operating costs need to be taken into account when deciding on a fleet plan. Provide a summary of these factors and explain their influence on fleet planning decisions.
8. Although the airline has begun to acquire a small of used A319s and a320s , it has over 50 MD-80s . What are the options for the future? Would an investment from from GGGF influence fleet planning strategy?
9. We both recognize that you have not had the resources to carry out a very detailed analysis. However , taking account of the fact that GGGF might in the right circumstances invest in Allegiant air – and having identified all possible fleet options – could you set out your preliminary recommendation for the future fleet?
ADDITIONAL NOTES: A full operating cost calculation would be very complex and time consuming . At this stage carry out the evaluation based on fuel, MRO, the allowance for the changes to user charges because of aircraft weight and lease costs. Do not consider crew costs. Assume all aircraft achieve an average load factor of 87%.
On question 8: Even though alligent air has begun to acquire used A320 family members , you should identify and comment briefly on all practical options on the basis that the airbus types could be removed