Allegiant Plans to Buy Nine Ex-Iberia Airbus A320s

Allegiant Travel Company intends to purchase up to nine used Airbus A320s for operation by its subsidiary airline Allegiant Air.

Las Vegas-based Allegiant Travel Company expects the average age of the Airbus A320 aircraft at delivery to be 12 years. They will be outfitted to seat 177 passengers in all-economy configuration and will be powered by CFM56-5B engines.

The A320s have most recently been operated by Spanish carrier Iberia, which, along with British Airways, is a subsidiary of International Airlines Group.

Iberia Airbus A320-200 EC-JSK lands at London Heathrow Airport in May 2009

On July 30, Allegiant announced it has agreed to lease nine used, CFM56-5B-powered Airbus A319 jets from GE Capital Aviation Services. At the time of the deal all the aircraft were being operated by UK-based carrier easyJet. On the same day, Allegiant said it had agreed to buy on a finance-lease basis another 10 A319s from Philippines-based carrier Cebu Pacific.

“The A320 aircraft type is a perfect complement to the smaller A319 and will enable us to continue cost-effective growth for years to come,” says Andrew Levy, president of Allegiant Travel Company. “These transactions represent a tremendous opportunity to purchase a sizable fleet of sister-ships with CFM-powered engines, the same engine type as our A319s, at very attractive prices.”

Adds Levy: “Finding up to nine aircraft of this pedigree available for purchase is unusual in our experience. Historically it has been difficult to find owners willing to sell quality assets at this point in their life cycle. Our cash reserves and strong balance sheet continue to provide us a unique ability in the used-aircraft space to move on these attractive opportunities.”

Levy continues: “We do not expect a material change to our 2013 capacity as we will vary MD-80 utilization appropriately. As with the earlier acquisition of A319s, we are committed to only acquire aircraft at values that support our existing business model of relatively low fleet utilization.”

Allegiant Travel Company expects to buy seven A320s in 2013 and two in 2014. Allegiant is now expecting its total 2013 capital expenditures to be between $270 and $280 million, compared with its previous guidance to analysts of $150 to $160 million.

The company expects to finance the purchase of the aircraft with debt.

Allegiant Air expects to place its first A320 into service late in the third quarter of 2013 and expects all nine aircraft to be in service by the end of 2014. It does not plan any additional McDonnell Douglas MD-80 retirements as a result of the A320 deal.

However, Allegiant’s agreements to lease and buy A319s and its planned A320 buy makes it appear likely that Allegiant will eventually replace its aging MD-80 fleet with used Airbus A320-family jets, which as a later design are quieter and more fuel-efficient than MD-80s.

By the first quarter of 20o13, Allegiant will also be operating six Boeing 757-200s on routes from the U.S. mainland to Hawaii. But while the Airbus A321-200 is almost a capacity match for the Boeing 757-200, it lacks the 757’s long-haul range and so the 757 is unlikely to be supplanted in the foreseeable future in Allegiant Air service by Airbus jets.