Eric M. Johnson

SEATTLE, (Reuters) – Allegiant Air (NYSE:) confirmed Wednesday its plans to purchase 50 Boeing 737 MAX planes valued at $5.5 billion. It is making a strategic switch in supplier and strategy in preparation for a rebound in tourism following the Pandemic.

One analyst reacting to Reuters’ Tuesday report on purchase plans, described the order as a drastic change in approach by the rapidly-growing domestic carrier. Previously, it had relied mainly upon used Airbus planes.

Allegiant is one of the most resilient U.S. airline recoveries,” Sheila Kahyaglu, Jefferies analyst, wrote. She added that it was evidence of post-pandemic confidence for leisure travel which “vastly outperforms corporate travel.”

According to Chief Financial Officer Greg Anderson, the Las Vegas-based airline will purchase 30 737 MAX7 aircraft and 20 737 MAX8-200 aircraft. This makes it the first customer in America for the larger version.

In an interview, he said the airline will be taking delivery of 10 aircraft in 2023 and 24 in 2024. 16 jets are expected to arrive in 2025.

It is an opportunity to boost your business. Boeing Co Qantas was one of two major medium-haul clients, followed by several Air France-KLM affiliated companies, and Qantas. Airbus took over in December.

Anderson explained that the deal with MAX and new MAX aircraft will enable 400 routes to be opened.

While he refused to give specific city names, he stated that there would be an increase in seating and 20% fuel economy compared with Allegiant’s Airbus older aircraft.

Pre-market trading saw Boeing share prices rise 0.5% Allegiant Travel Co’s shares fell 0.7%.

Allegiant has relied mostly on older aircraft to lower costs. According to Jefferies, this strategy lets it use some planes less frequently and target thinly populated routes.

Raymond James analysts stated that this strategy is suitable for the “choppy recovery”, but cautioned about operational inefficiencies associated with a mixed fleet.

Anderson indicated that Allegiant has 110 Airbus A319s or A320s currently in operation and plans to continue purchasing A320s from the second-hand market. It has some 50 aircraft – 20 A320s and 30 A319s – that it may need to retire over the coming decade.

Wednesday’s expansion marks the latest evidence of “ultra-low cost” carriers, which combine low fares with additional charges. These carriers will emerge from the COVID-19 pandemic in relative strength.

Anderson stated that “our bookings are higher than they were before 2019”, referring to levels of travel prior to the pandemic.

Allegiant still has concerns about fuel prices, supply chain and labor problems, along with mounting inflationary pressures, just like other airlines.

Mexico’s Viva Aerobus, in December, announced a commercial alliance to Allegiant for the provision of flights between Mexico City and the United States.