JetBlue Airways Corporation (JBLU), Southwest Airlines Co. (LUV): Allegiant Travel Company (ALGT) Finally Tackles the New York Market

Allegiant may initially struggle to convince people from New York City proper to travel to Stewart Airport or MacArthur Airport for cheaper fares, but it will benefit from the large suburban population. Suffolk County, where MacArthur Airport is located, has a population of 1.5 million. Orange County (the location of Stewart Airport) is less populous, but still has nearly 400,000 residents.

Many suburban New Yorkers are accustomed to driving into the city whenever they want to fly. Allegiant will offer a compelling alternative for residents of New York’s eastern and northern suburbs: cheap flights from nearby suburban airports to popular vacation destinations. If Allegiant’s first set of New York routes prove successful, it could pave the way for additional service in the region.

Will Allegiant attack competitors head-on?
The biggest barrier to Allegiant’s expansion in the New York area is that JetBlue Airways Corporation (NASDAQ:JBLU) and Southwest Airlines Co. (NYSE:LUV) already offer service to Florida from Stewart Airport and MacArthur Airport, respectively. So far, Allegiant has followed its customary strategy by avoiding direct competition; neither of the two routes it announced last week is served by another carrier.

However, given the size of the New York market, Allegiant Travel Company (NASDAQ:ALGT) might want to consider going head-to-head with JetBlue Airways Corporation (NASDAQ:JBLU) and Southwest Airlines Co. (NYSE:LUV) on other routes to Florida if its first two routes perform well. With its lower operating costs, Allegiant should be able to offer the lowest airfares in the market while maintaining a healthy profit margin.

There is some evidence that Allegiant is willing to enter a few high-traffic markets if doing so will allow it to stimulate incremental demand. For example, last month the carrier announced that it will serve the busy Los Angeles-Honolulu route starting in October. Allegiant thus may be laying the groundwork for a strategy of more direct competition with other airlines. This could make it a bigger thorn in the side of competitors in New York and elsewhere.

The article Allegiant Finally Tackles the New York Market originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines. The Motley Fool owns shares of Allegiant Travel and Spirit Airlines.

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