Shares in low-cost airline Allegiant (ALGT - Get Report) fell 9% Monday, continuing a trend that has resulted in a 23% loss since mid-October. However, Allegiant's stock remains the third-best performer among airline shares this year.

Monday's decline was precipitated by a report by Raymond James analyst Savanthi Syth, who downgraded Allegiant shares to market perform from outperform "due to more modest upside potential."

Shares closed Monday at $175.13, down $18.15. The shares are up 16.5% year to date, trailing only JetBlue, which is up 56%, and Alaska, up 33%. The other six major airlines are all down for the year. In mid-October, Allegiant shares traded at $228.79.

Syth cut her full-year 2016 estimate by 6% to $13.20. Analysts surveyed by Thomson Reuters estimated $13.52. "With modest projected y/y earnings growth and consensus estimates likely needing to adjust lower, we believe the shares are likely to remain pressured in the near term," Syth wrote.

"If fuel prices were to correct sharply, we believe it will take longer to successfully implement fare increases," Syth wrote. "While Allegiant does not have much direct competition, its demand is more price-elastic."

The Raymond James energy team anticipates that lower fuel prices will lead to a sharp supply correction. The firm predicted a 2016 Brent fuel price of $60, well above the current $45 level and the $48 futures price. Syth forecast that Allegiant's jet fuel cost will fall 8% in the first half of 2016 and then rise 20% in the second half.

Syth cautioned that continued low fuel cost would boost the upside potential of Allegiant shares by 20% to 30%.

In any case, a second concern is that she anticipates that Allegiant will have to perform its first heavy maintenance on its Airbus aircraft in 2016, rather than 2017, boosting costs. 

Heavy aircraft maintenance is costly. Allegiant said two weeks ago that it will end its Hawaii service in August and retire its Boeing 757 fleet rather than put the five aircraft through D-checks, which occur about once every six years.

"Considered the most rigorous maintenance event, D- checks normally take about 50,000 man hours to complete, can take two months to finish and essentially involves taking the entire aircraft apart to be refurbished or have parts replaced," The Las Vegas Review-Journal reported. "Rather than bear the expense of the heavy maintenance, the company opted to retire the planes since there's virtually no aftermarket for the used 757s."

Despite the downgrade, Syth wrote, "We remain positive on the outlook for Allegiant given its mid-size market opportunity, differentiated and low-cost product, and strong balance sheet."

Allegiant is near the top of the list of airlines that will expand capacity in 2016.

In a recent report, Goldman Sachs airline analyst Tom Kim projected that the U.S. airline industry will expand 2016 capacity by 4.4%. Low-cost carriers are expected to account for 73% of the growth, with Spirit capacity up 20%, Allegiant capacity up 15% and Virgin America capacity up 14.5%.

Buckingham Research analyst Dan McKenzie seemed to have soured early on Allegiant. In a report issued Nov. 24, he rated every U.S. airline a buy except for Allegiant, which he rated neutral. McKenzie said his ratings "followed a review of capacity trends."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.