The Context

  • Upon our investment, Allegiant (based in Las Vegas) was moving toward a hybrid low cost airline operating to large leisure destinations on non-competed routes, changing from a charter operation
  • From our perspective, Allegiant had a number of compelling characteristics:
    • High quality management team
    • Sound operations
    • Good systems
  • We joined an investment consortium with Robert Priddy, founder of ValuJet and director of AirTran, plus CEO & largest shareholder, Maurice Gallagher, with objective of taking Allegiant to next major phase of development and rigorously executing a scheduled LCC approach

What was achieved

  • Allegiant achieved a major transformation
    • Orlando added to Las Vegas destination focus
    • Small cities served expanded from 13 to 39; most uncompeted
    • Ancillary offering expanded from hotel into full suite of products
    • Average ancillary revenue per passenger increased from U$5.87 in 2004 to US$15.06 in 2006
  • Grew pretax profit from US$7.3m in 2005 to US$50.7m in 2007.
  • Since grown to over 60 aircraft and 7m passengers per year

Key Lessons

  • ‘‘Brownfield’ restructurings of existing airline are attractive if have right platform and strategy
  • Low capital intensity (older aircraft) increases flexibility and lowers operating risk
  • Sophisticated information systems benefit management decision making (e.g. ability to drill down to flight level performance)

Irelandia Position

    • Irelandia brought three senior resources to board meetings led by Declan Ryan
    • Support of management between Board meetings on range of critical items
    • Irelandia investment May 2005; IPO December 2006
    • Irelandia sale of remaining 75% of shares May 2007
    • Achieved 6.5x return in 2 years