Allegiant Air faces bumpy air after CBS report

Allegiant Air is facing scrutiny after a bombshell "60 Minutes" report questioned the safety of its planes. The airline and some analysts say the story is overblown.

Posted: Apr 17, 2018 5:32 PM
Updated: Apr 17, 2018 5:32 PM

Allegiant Air may be able to weather a scathing "60 Minutes" report on the low-price airline's ugly safety record.

The airline and some of the analysts who cover it say it is safe and on track to put many of its operational problems behind it.

Sunday's "60 Minutes" report detailed more than 100 of what it described as serious mechanical incidents between the start of 2016 and October 2017. Those incidents included mid-air engine failures, smoke and fumes in the cabin, rapid descents, flight control malfunctions, hydraulic leaks and aborted takeoffs. Allegiant has no fatal crashes since its 2001 founding, but it reported at least 60 unscheduled landings and 47 in-flight emergencies, over the past two years, according to "60 Minutes."

The number of Allegiant's serious safety problems were three-and-a-half times greater than the nation's other major airlines, according to the report. Most of the problems were associated with the MD-80 aircraft, which are among the oldest aircraft operating today. They have not been built since 1999, nearly 20 years ago. According to AirFleets.net, a service that tracks aircraft owned by airlines, the average age of the MD-80s that Allegiant still operates is 28.2 years old.

But Allegiant has been retiring those MD-80 planes, which frequently encounter service problems. At the start of 2017 it had 47 MD-80 planes, 34 Airbus planes and four older model Boeing jets. Today it has 27 MD-80s and 73 Airbus jets. It plans to retire the last of the MD-80s by the end of this year.

"CBS produced a one-sided narrative by cherry-picking interviews and ignoring publicly-available facts," said Allegiant's response to the report.

Shares of Allegiant fell nearly 9% dive on Friday, and shares fell another 2% in Monday.

Related: Boeing clinches deal to sell 47 jets to American Airlines

Some of the analysts who follow the stock said they agreed with the airline that the report overstated the extent of the problems.

"By end of the year their fleet age will be much more in line with the rest of the industry," said Joseph DeNardi, an analyst with Stifel who has a buy recommendation on the stock.

Both DeNardi and Savanthi Syth, airline analyst at Raymond James, said they expect the airline to lose relatively few bookings because of the 60 Minutes report. They say that the airline serves smaller airports that are often not well served by major carriers and that it offers the low fares that are likely to keep customers booking flights.

Syth has a neutral rating on the stock but said she believes the sell-off in shares associated with the report was not justified.

Neither DeNardi and Syth have ever flown the airline, though both said they would have no reservations doing so. Syth said her inlaws frequently fly on the airline. The "60 Minutes" report quoted several experts saying they would not fly the airline themselves.

The airline's statement said it expects employees to adhere to all company procedures and policies, including safety procedures, and denied the claims of critics in the report that there is pressure to put profitability over safety. It said a pilot who was fired after ordering an evacuation of a plane which was a focus of the report was not fired for putting passenger safety ahead of airline assets, as the report said, but because the airline determined he unnecessarily evacuated a plane "at great risk to the crew and passengers" even though there "was no smoke, fire, or an aircraft malfunction." The report said there was smoke in the cabin and a fire in the engine that prompted the evacuation.

The pilot involved in that incident is suing the airline for wrongful termination.

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