Sunday’s ’60 Minutes’ Exposé could Expose a Lead
Steve’s breakdown: Allegiant Travel is about to get an audience of 12 million people to watch it crash and burn but it could all work out. Here’s how:
- No one is getting hurt
- Their Crisis Management agency is not a Crisis Management agency (R&R, AKA “What Stay’s in Vegas” agency)
- Now would be a great time to reach out before this hits (I know it’s Sunday but email works Sundays)
- Their prices are amazingly low so a campaign to spring board off this report could be a great pitch
Here’s some contact info:
- CMO: firstname.lastname@example.org
- CEO: email@example.com
- COO: firstname.lastname@example.org
LAS VEGAS, NV: Uh-oh. Budget airline Allegiant Travel (ALGT) could be heading into some nasty turbulence. It has plunged 7%, or $11.90, to $153.35 today ahead of a 60 Minutes segment to air Sunday, criticizing the company’s safety and maintenance record.
The subject will be “in-air breakdowns,” a phrase you never want to hear in relation to an airline. The program is promising a “double-length segment.” Oh, brother.
Neither CBS (CBS), broadcaster of 60 Minutes, nor Allegiant could be reached for comment.
The topic was first broached by an exposé about Allegiant in the Tampa Bay Times way back in November 2016. Allegiant CEO Maurice Gallagher responded at the time by saying the accusations were at best misleading, as well as “unsubstantiated” and “incendiary.” Allegiant’s stock actually went up 24% in the weeks after the article was published.
But a report on 60 Minutes is a very different thing. An average of 12 million people, or 4% of the U.S. population, are reported to watch the program each week. (The true reach seems to be much broader, as I discovered a few years ago. Appear on 60 Minutes, even briefly, and you will find yourself being greeted for weeks afterwards by strangers in elevators, people sitting at the next table in restaurants, even individuals passing you in the street. It’s weird.)
The partial good news for Allegiant is that the timing isn’t as bad as it may seem. A look through past financials shows that the airline is no more dependent on the spring and summer months as it is on the rest of the year. The second and third quarters typically account for only around half of annual revenues.
Nor is Allegiant obviously in vulnerable financial shape. Last year operating income—earnings before interest and taxes—was seven times net debt interest. The company had $550 million in cash, receivables, and short-term assets at year end, compared to $1.6 billion in total liabilities.
But the short-term newsflow is dangerous. The business is vulnerable to publicity, and so is the stock price. Even after Friday’s fall, it is 13 times forecast earnings for the next 12 months—way more than rivals. Budget competitor Spirit Airlines (SAVE), a Barron’s pick, trades for less than 10 times forecast earnings. United Continental Holdings (UAL), American Airlines Group (AAL), and Delta Air Lines (DAL) all trade for around eight times.
Bad publicity can be a disaster, whether it’s justified or not. Just ask SeaWorld Entertainment (SEAS). The company is still dealing with the fallout from the 2013 documentary Blackfish. SeaWorld recently received a so-called Wells Notice from the Securities & Exchange Commission, recommending a fine or other penalty over the disclosures it made to investors as the documentary hurt business. Its stock remains less than half the peak seen back in 2013.
The Blackfish documentary was as thin as stone soup. Yet SeaWorld is still struggling to win back customers. Millions of people were just shocked, shocked to hear that orcas were being kept in a giant water park, and refused to visit as a matter of principle.