The Las Vegas-based leisure carrier will now extend its reach and assume control of Sun Country’s charter and cargo arms.
As Allegiant Air closes its $1.5 billion deal to acquire like-minded Sun Country Airlines, the leisure-focused ultra low-cost carrier (ULCC) now boasts a fleet of nearly 200 narrowbody jets and a post-combination network of 175 cities, securing highly sought scale in a growth-constrained sector.
Completion of the cash-and-stock deal on 13 May came after Allegiant and Sun Country received approval from the US Department of Transportation last month. Shareholders of the respective companies have also approved the merger.
The Las Vegas-based leisure carrier’s rapid growth contrasts the recent collapse of Spirit Airlines, which was at one point the country’s largest ULCC.
Allegiant’s flexible-capacity model now emerges as perhaps the leading strategy for ULCC survival in North America. Both carriers have long employed flexible-scheduling models that anticipate surges in demand during certain times of the day, week and year. Spirit had attempted to pivot to a similar strategy, among other structural changes, before succumbing to recent jet fuel shocks, operating its final flights on 2 May.
Both Allegiant and Sun Country have proven steady financial performers in recent years and weathered storms that proved catastrophic for others, with Sun Country benefiting from charter and cargo operations.
Allegiant estimates that it will realise about $140 million in “annual synergies within three years” of integrating Sun Country, pointing to the scale of the combined network and the benefits of “fleet optimisation”.
“The transaction is expected to be accretive to earnings per share in the first full year post-closing, while maintaining balance sheet flexibility,” it says.
While the merger of two strong balance sheets is compelling, there are still questions surrounding the growth potential of the Allegiant-Sun Country combination. Some observers believe there are only so many city pairs that match Allegiant’s strategy of targeting underused secondary airports with minimal competition, limiting how far a low-frequency model can go.
For now, Denver-based discounter Frontier Airlines‘ network boasts greater passenger capacity than that of Allegiant-Sun Country, though the USA’s capacity leader among ULCCs could change as Allegiant’s fleet grows. The new composition of the USA’s low-cost market will become more apparent in the weeks ahead as carriers jostle to fill the void left by Spirit.
Notably, both Avelo Airlines and Breeze Airways are targeting similar network connections as Allegiant, with Breeze operating a 50-strong fleet of lower-capacity Airbus A220s. Avelo also intends to operate smaller narrowbody jets, as it expects to start taking deliveries of Embraer E195-E2s in 2027. Operating smaller jets outside of major hubs could prove advantageous in the long term.
Allegiant will integrate about 60 older 737-700s and -800s from Sun Country’s fleet, which includes a 20-strong cargo fleet contracted to operate on behalf of Amazon.
The company also holds firm orders for an additional 30 aircraft – all 737 Max 8-200s – and options for an additional 80 Boeing narrowbodies.
“The combined company will have greater flexibility to optimise aircraft deployment, improve utilization and support long-term growth through economic cycles,” Allegiant says.
Allegiant has not entirely avoided financial struggles related to the higher jet fuel prices squeezing the global airline industry. During the carrier’s first-quarter earnings call, chief executive Greg Anderson acknowledged that Allegiant is “not immune” to big-picture cost pressures. It has trimmed capacity in response to fuel prices after posting a $42.5 million profit in the January-March period.
The carrier is also among several “value airlines” that have recently asked for financial support from the US government.
As for network strategy, Allegiant identifies Sun Country’s hometown hub at Minneapolis-St Paul International airport as an “important operating centre for the combined company”. Meanwhile, it will explore opportunities to expand its leisure network beyond 650 routes.
No changes are being made immediately to “frontline roles” such as pilots and flight attendants, Allegiant says, adding that it will work with unions throughout the integration process.
The new, larger entity will remain “committed to maintaining strong relationships with the communities, airports, customers and partners served by both airlines, while continuing to support the leisure-focused markets that have been central to each company’s success”.
Some corporate roles could be considered redundant as functions overlap, however.
“At the corporate level, some roles may overlap as functions are integrated,” it says. “Any potential changes will be evaluated carefully, with a focus on fairness, respect, and clear communication.”
In the C-Suite, Allegiant CEO Greg Anderson leads the post-combination company, while Sun Country CEO Jude Bricker has been appointed to a position on the company’s board.
Looking to the stock market, Sun Country’s ticket of “SNCY” has ceased trading on the New York Stock Exchange, while Allegiant continues as “ALGT”. Allegiant’s stock price had yet to react to the news following the deal’s closure after trading hours closed on 13 May.
Allegiant’s acquisition of Sun Country is the first domino to fall in what could become a season of airline consolidation, as the industry has been abuzz with combination chatter in recent months and the Trump administration has signalled a friendly stance toward tie-ups.
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