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Allegiant Airlines: Finding a New Customer Segment
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Founded in 1997, Allegiant Airlines (Allegiant) was one of the most profitable ultra-low-cost airlines in the United States. Allegiant maintained high profit margins by targeting the uncaptured market segment for leisure travel and using a unique way of managing cost and revenue drivers. Allegiant avoided direct competition with traditional airlines and captured the new market of price-sensitive leisure travelers. After employing extreme cost-reduction and revenue-enhancement strategies, Allegiant achieved one of the highest profit margins in the industry. In 2015, despite inexpensive airfares, Allegiant received low scores on customer satisfaction. The airline also faced labour and safety issues by the end of 2015, but it took several steps to resolve the issues in 2016. With increasing competition, rising costs, and low customer satisfaction, maintaining long-term profitability remained a challenge for Allegiant. How could the airline sustain its position in the market?