Allegiant Completes Merger with Sun Country

Allegiant Air announced the completion of its merger with Sun Country Airlines, with a combined fleet of 195 aircraft serving 175 cities and more than 650 routes. The growth of the new Allegiant should provide some relief for budget travelers in the wake of the Spirit bankruptcy. Announced in January, the merger of the two leisure focused airlines was quickly approved by regulators given virtually no route overlaps between the carriers.

Allegiant will maintain the Sun Country hub in Minneapolis as a key element in its strategy, which is expected to bring $140 million in synergies over the next three years once the integration of the carriers is completed.

An Unusual Business Model

Allegiant and Sun Country both operate on a lower utilization business models, dropping flights in markets on days that flights would typically be unprofitable. With a focus on charter, as well as a freight operation for Amazon, the joint carrier will differentiate itself from other ultra low cost carriers with their multiple revenue stream strategy.

“Today marks a defining moment in Allegiant’s history as we officially join forces with Sun Country to create the leading leisure-focused airline in the United States,” said CEO Greg Anderson. “By bringing together two strong airlines with similar business models, we are creating a more differentiated and durable airline – one well positioned to deliver lasting value for our customers, team, and shareholders.”

The Bottom Line

The merged carrier will continue to focus on profitability and cash flow, with alternative uses for aircraft with their lower utilization strategy. With segment-leading margins, both Allegiant and Sun Country have low debt levels, and have the ability to profitably grow the airline organically from the combined operations. We expect Allegiant to continue its profitable operation while providing budget-oriented options for leisure travel in the wake of Spirit’s demise.

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