Allegiant - Investors react to incidents - Curt Lewis

Investment group calls on Allegiant Air to form safety committee

An investment group is calling on Allegiant Air, which has had a series of emergency landings over the last several months, to form a safety committee. Here, a plane sits at St. Pete-Clearwater International Airport, where the discount airline accounts for 95 percent of traffic. 

An investment group with a stake in Allegiant Air is urging the company to form a board of director's safety committee in the wake of emergency landings and questions about the company's maintenance operations.

Dieter Waizenegger, executive director of CtW Investment Group, told Allegiant a committee "that focuses exclusively on safety would appear long overdue" given the age of the airline's aircraft fleet and media reports suggesting maintenance problems at the Las Vegas airline.

Waizenegger also criticized Allegiant over the lack of independence of its board, several of whose members have close ties to CEO Maurice Gallagher Jr.

In the meantime, the airline reported robust fourth-quarter earnings Wednesday as it benefited from low fuel costs and a continued rapid expansion. Net profit hit $56.7 million, up considerably from $4.7 million in the year-earlier period and $44.5 million in the third quarter.

The airline's fourth-quarter operating revenue was $310 million, up from $278 million in 2014's fourth quarter.

Allegiant stock closed Wednesday at $158.50, down 2.2 percent, on a day when the Nasdaq, on which the company's stock trades, also fell 2.2 percent.

Allegiant maintains that questions about the airline's safety are unfounded despite highly publicized operational problems in 2015. In a letter to the Tampa Bay Times late Tuesday, Gallagher attacked articles in the newspaper about a series of emergency landings and other issues as biased and insulting.

He accused the newspaper of quoting supporters of the Teamsters, the union representing Allegiant pilots that has accused the company of sacrificing safety to fatten profits. Allegiant has, in turn, accused the Teamsters of drumming up concerns about safety as a ploy in contract negotiations.

"Misleading the public about safety is a common tactic of the Teamsters," Gallagher wrote in a letter to the editor that is on today's op-ed page. "While we expect manipulation from them, we - along with your readers - expect more from you. We welcome scrutiny, but you should scrutinize sources and understand conflicts of interest before printing irresponsible allegations."

Allegiant flies about 95 percent of the passenger traffic at St. Pete-Clearwater International Airport and is responsible for the record 1.6 million passengers who used the airport in 2015.

The budget airline has experienced a series of highly publicized problems in the past year, including five emergency landings on Florida flights during the last week of 2015. The Times last week reported on one Allegiant aircraft that made four emergency landings in six weeks, and previously interviewed an Allegiant mechanic who quit after two weeks because he said the airline's maintenance operation was dysfunctional.

Allegiant's chief operating officer, Steve Harfst, abruptly resigned earlier this month without explanation, opening speculation the decision was related to maintenance issues.

Affiliates of CtW Investment manage about $250 billion in pension funds for a variety of unions, including the Teamsters, representing 5.5 million workers. In the letter to Allegiant's board, Waizenegger urged the airline to replace board member Linda Marvin, former Allegiant chief financial officer and chair of the board's audit committee. He said Marvin had long-term ties to Gallagher and said the airline needed to replace her and expand the board with truly independent members.

"Recent negative publicity over airplane safety and ongoing investigations into in-flight incidents by the Federal Aviation Administration lend urgency to Ms. Marvin's swift replacement to ensure rigorous, independent oversight of regulatory compliance by (the) Audit Committee."

Allegiant did not respond to a request for comment about CtW Investment's letter. In a statement provided to the Las Vegas Review-Journal, Gallagher said he was not surprised by the letter, saying CtW had close ties to the Teamsters, noting the union's president serves on CtW's leadership council.

"This is yet another tactic that the Teamsters have employed to apply pressure to the company through unfounded public allegations, circumventing our mediated negotiations," Gallagher said.