Allegiant Travel Company (NASDAQ: ALGT) shares tumbled on Monday after a report by “60 Minutes” questioning the airlines safety issues. Shares fell by 6 percent on Monday, falling nearly 14 percent in the past two consecutive days on negative reports.
Allegiant Air is a small, ultra-low cost carrier based in Las Vegas, which is reportedly one of the most profitable airlines. The air carrier flew 12 million passengers last year, but the company has been to known to have issues, especially in-flight issues since 2015.
CBS’ program, that aired on Sunday, alleged that Allegiant’s planes are more likely to have mechanical problems in-flight versus its competitors, citing industry experts and a review of Federal Aviation Administration records.
The TV segment included interviews from previous passengers as well as former National Transportation Safety Board member, John Goglia, who has discouraged his family, friends and himself from flying Allegiant.
Between January 2016 and end of last October, “60 Minutes” discovered that Allegiant has had more than 100 serious mechanical incidents, including mid-air engines failures, smoke and fumes in the cabin, rapid descents, flight control malfunctions, hydraulic leaks and aborted takeoffs.
“All of us at Allegiant are proud of our strong safety record, as noted in the most current, comprehensive FAA audit. We not only comply with all mandatory safety regulations and guidelines, but also participate in numerous voluntary safety programs. Simply stated, safety is at the forefront of our minds and the core of our operations.” said Eric Gust, Vice President of Operations, in a response to CBS’ program.
One Wall Street analyst anticipates that the report will hurt Allegiant’s financial results in the near future.
“We found little in the way of incrementally negative data points concerning Allegiant’s operational challenges over the past few years,” Joseph Denardi , an analyst at Stifel Nicolaus & Co., wrote in a note to clients. “The bottom line is that, true or false, that was 30 minutes of horrible publicity for Allegiant with sound bites that will extend the story. We'd be surprised if there isn't an impact to bookings in the nearish term."