Author Topic: ALGT - Allegiant Travel Company  (Read 7069 times)

MrB

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ALGT - Allegiant Travel Company
« on: April 15, 2018, 01:54:30 PM »
Not a bad time to start a thread

Airing today

60 Minutes Preview: Is Allegiant Airlines Safe to Fly?
https://www.cbsnews.com/video/60-minutes-allegiant-air-flying-under-the-radar/



BeerBBQ

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Re: ALGT - Allegiant Travel Company
« Reply #2 on: April 18, 2018, 05:33:48 PM »
Do you have an opinion on the company and/or stock?

Gamecock-YT

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MrB

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Re: ALGT - Allegiant Travel Company
« Reply #4 on: April 19, 2018, 09:54:44 AM »
Do you have an opinion on the company and/or stock?

https://en.wikipedia.org/wiki/ValuJet_Airlines

https://en.wikipedia.org/wiki/ValuJet_Flight_592
Gamecock-YT do you care to elaborate on the connection you're making between ValuJet & ALGT?

MrB

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Re: ALGT - Allegiant Travel Company
« Reply #5 on: April 19, 2018, 10:10:23 AM »
Do you have an opinion on the company and/or stock?
BeerBBQ I should be more diligent and put a short synopsis in the first post. Been meaning to do it, but a bit swamped right now.

Generally speaking the space interests me, because I view the ULCC (Ultra Low Cost Carriers) market as distinct from the LCC (Low Cost Carriers) market with a significant runway for growth if you compare US penetration v the rest of the world. From memory the US is at something like 6% and Europe for example at 31%. You also have a major consolidation story that's played out by the main price setters over recent years in the US.

Specifically, I think all three companies (Frontier, SAVE & ALGT) in that space are interesting, but I prefer ALGT over SAVE (Frontier is not listed, but their S1 of last year is an excellent read), because Gallagher has a big stake, runs it very conservatively, focus on a different market (leisure with 80% of routes without any competition) and runs a low frequency, low capex model (most LCCs have high capex, high frequency models). For valuation I refer you to recent presentations where you will note the company is going through a major fleet change, which management pegs at 110 planes by 2020 x $5m EBIT/plane, throw in the Trump tax rate and you're getting to a sensible multiple considering the $2.4Bn market cap.

Major risks
- Gallagher related party transactions (not material)
- Airline (plane goes down)
- New property venture
- Getting too big?
- Does switch to A320 imply they're changing the model?
- Fuel (oil goes up; they don't hedge, which I like, but it means you take any increase on the nose)
- Labor (not a worry for the foreseeable future

Thanks for the nudge-got to run
« Last Edit: April 19, 2018, 10:12:39 AM by MrB »

bizaro86

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Re: ALGT - Allegiant Travel Company
« Reply #6 on: April 19, 2018, 10:26:01 AM »
Do you have an opinion on the company and/or stock?

https://en.wikipedia.org/wiki/ValuJet_Airlines

https://en.wikipedia.org/wiki/ValuJet_Flight_592
Gamecock-YT do you care to elaborate on the connection you're making between ValuJet & ALGT?

Not Gamecock, but the CEO of Allegiant was a director of Valujet at the time of their fatal crash.

Gamecock-YT

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Re: ALGT - Allegiant Travel Company
« Reply #7 on: April 19, 2018, 10:44:17 AM »
Do you have an opinion on the company and/or stock?

https://en.wikipedia.org/wiki/ValuJet_Airlines

https://en.wikipedia.org/wiki/ValuJet_Flight_592
Gamecock-YT do you care to elaborate on the connection you're making between ValuJet & ALGT?

Same CEO taking a wreckless track towards safety eventually will get burned (no pun intended). Just copy over the ValuJet wiki and that'll be the story of Allegiant. If they are already cutting corners when oil is as cheap as it has been, imagine what they'll do if we get a permanent spike. Sure getting rid of the MD80s to a younger fleet will help, but only a matter of time. I would never recommend my family travel on G4.

MrB

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Re: ALGT - Allegiant Travel Company
« Reply #8 on: April 19, 2018, 11:37:44 AM »
Do you have an opinion on the company and/or stock?

https://en.wikipedia.org/wiki/ValuJet_Airlines

https://en.wikipedia.org/wiki/ValuJet_Flight_592
Gamecock-YT do you care to elaborate on the connection you're making between ValuJet & ALGT?

Same CEO taking a wreckless track towards safety eventually will get burned (no pun intended). Just copy over the ValuJet wiki and that'll be the story of Allegiant. If they are already cutting corners when oil is as cheap as it has been, imagine what they'll do if we get a permanent spike. Sure getting rid of the MD80s to a younger fleet will help, but only a matter of time. I would never recommend my family travel on G4.

"same CEO" Gallagher was an investor, lender to and in that sense one of the founders of ValuJet; as a result he was also a board member, but Robert Priddy was the CEO.
http://getfilings.com/o0000950109-97-002648.html

Even so,

"wreckless track towards safety" - contractor SabreTech was ultimately singled out for the ValuJet accident; improperly preparing cargo (old oxygen generators) that was loaded, caught and set the plane on fire. SabreTech was criminally charged with a 24 count federal indictment in 1996 and by 2002 only one survived the appeals process, (the failure to train their [SabreTech] employees on hazmat procedures).

Even the initial NTSB investigation did not apportion the blame to ValuJet's approach towards safety.
https://www.ntsb.gov/investigations/AccidentReports/Pages/AAR9706.aspx

Ultimately, I think defence lawyer for two SabreTech defendants, Jane Moscowitz, put it best, "The crash of the plane was not a criminal act, it was an accident and a tragedy."

Best piece by far on the accident
https://www.theatlantic.com/magazine/archive/1998/03/the-lessons-of-valujet-592/306534/



siddharth18

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Re: ALGT - Allegiant Travel Company
« Reply #9 on: April 19, 2018, 11:41:33 AM »
No dog in this fight. But I did watch the 60 Minutes segment. They mentioned that pilots are disincentivized from reporting mechanical problems. The attitude and incentives from the top seem to favor flight utilization rate over safety. What would Munger think about that?
« Last Edit: April 19, 2018, 11:44:03 AM by siddharth18 »