Discount carriers such as Allegiant (ALGT - Get Report) could do well this holiday season, as more travelers who could once afford higher-priced, legacy airlines, are trading down to cheaper-priced air travel, said Raymond James analyst Savanthi Syth.
Allegiant, which is known for servicing smaller areas, is growing its capacity. There has been a dichotomy in the airline industry regarding capacity with legacy airlines cutting capacity to boost their bottom line, while discount airlines are maintaining or adding capacity to service more customers.
Allegiant is also slated to get into Hawaii, a new market, starting next year, Syth noted. The effects of this organic growth should be felt in 2013, she added.One trend to watch for this holiday season is the typical increase in tourism that Las Vegas experiences around the new year. Allegiant may also be along for the Vegas ride since it flies into that city. Allegiant has been able to make up for increases in fuel prices by hiking its fares. The airline reported $191.5 million in operating revenue in the third quarter, up 17% from a year ago. Shares of Allegiant are up almost 6% year to date.