Allegiant CEO defends budget airline playbook after closing Sun Country deal

Allegiant Travel Co. officially closed its acquisition of Sun Country Airlines on Wednesday, and the combined airline’s chief executive, Greg Anderson, is doubling down on the low-cost model despite rising jet fuel costs and industry upheaval.

“Our model was built to protect margins and not chase growth,” Anderson told CNBC.

The $1.5 billion cash-and-stock deal, including debt, was announced in January. The two airlines will keep their own brands and booking sites for now. The combined carrier will serve roughly 175 cities with more than 650 routes, according to Allegiant.

Anderson says the company will remain careful about adding capacity, a strategy that has helped shield it from troubles hitting other discount carriers. Allegiant plans to boost flights during peak travel seasons—summer and spring break—and pull back on slow Tuesdays and Wednesdays. “We’ll park a lot of fleet on a Tuesday in September,” Anderson explained, allowing the airline to charge more when demand is high.

Both Allegiant and Sun Country cater to budget travelers, connecting smaller cities to vacation spots. Sun Country also runs cargo operations for Amazon.

Demand remains strong, even from price-sensitive leisure customers, Anderson said, despite jet fuel costs roughly doubling since February. Fuel is typically an airline’s second-biggest expense after labor, and carriers have been raising fares to compensate. The Association of Value Airlines, which includes both Allegiant and Sun Country, recently asked the Trump administration for $2.5 billion in fuel relief, but Transportation Secretary Sean Duffy said he didn’t see the need.

Allegiant reported a $42.5 million profit for the first quarter, up 32% from a year earlier. “It shows you some low-cost models can work,” said Raymond James analyst Savanthi Syth.

The deal closes just weeks after Spirit Airlines, once a fast-growing budget carrier, shut down in the biggest U.S. airline collapse in a generation.

Allegiant hasn’t shared financial projections for the combined company, but said it expects second-quarter capacity to drop 6.5% from last year, with third-quarter capacity flat to slightly lower. The big four—Delta, American, United and Southwest—still control about 80% of the domestic market, according to federal data.