Fleet Planning for Allegiant Air

To keep its operating costs down, Allegiant Air initially purchased older McDonnell Douglas MD-80 in 2002, which is obtained at lower costs, but these aircraft have higher operational costs per passenger, higher aircraft and fuel charges, and have a lesser number of seats. To remain profitable, the airlines must bring down the operating costs, while increasing the block per hour utilization for the aircraft. Allegiant Air is considering switching over to the new aircraft models such as the Airbus 757, Airbus 319 and Airbus 320. The plan is to phase out the MD-80 models while replacing them gradually with the newer models. The following figure gives the proposed fleet breakdown and composition until the end of 2015. This figure will increase to 53, while the total fleet will increase from the 66 units in 2013 to 78 units in 2015. The main reason why the airlines still operate the MD-80 aircraft is the lower monthly lease at $ 38,000 while the charges are $ 230,000 for A319 and $ 270,000 for A 320. This huge price differential has an impact on the operating costs (Nutcracker, 2014). One of the most important metrics to calculate an airline operator’s efficiency is the revenue per passenger kilometers – RPK. It is calculated as the product of (number of passengers) and the (distance traveled). Important concepts in this calculation are the stage length and journey of travel. Passengers traveling long distances pay more than those traveling shorter distances. However, the number of passengers carried is less in the long-distance case (Feo and Bard, 2009). The passenger load factor also becomes important in deciding the RPK (Allegiant, 2014). Please refer to the RPK calculated for the three types of baselines, using data from the Nut Cracker Excel sheet.