Shares of Allegiant Travel Company ALGT - the parent company of Allegiant Airlines - declined 3.1% on Apr 16, closing the trading session at $146.40. A television program aired on Apr 15 highlighting the multiple mechanical problems on Allegiant's flights, contributed to this sharp decline. Earlier, the Allegiant stock had slipped further to the tune of 8.6% on Apr 13, following reports that the show will be telecast in two days' time.
The Damaging Report
CBS News' report, "60 Minutes", painted a gloomy picture of the airlines, alleging that it was facing a number of safety-related issues. The report further stated that the poor safety standard was responsible for around 100 serious mechanical incidents in the January 2016-October 2017 time frame.
Per the report, this Zacks Rank #4 (Sell) carrier's operations have been crippled by multiple aborted takeoffs, in-flight mechanical problems and emergency landings in recent times owing to the below-par safety standards. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Naturally, 60 Minutes has invited attention from law makers who called for an enquiry regarding the system failures. The report also showed the U.S. Federal Aviation Administration (FAA) in poor light, alleging that the long-standing mechanical issues at Allegiant persisted due to FAA's slackness.
However, Allegiant has vehemently denied the allegations, attaching various adjectives like "unoriginal, "outdated" and "false narrative". The FAA has also stated that it does not compromise with safety issues and has welcomed an enquiry.
Despite the denials, we believe that Allegiant's passenger traffic will reduce at least in the short term. This is because passengers might be skeptical to fly on Allegiant, unless a report emerges clearing the carrier of the allegations.
Allegiant apart, issues related to customer service have hurt airlines like United Continental Holdings, Inc. UAL , Spirit Airlines, Inc. SAVE and Alaska Air Group ALK in recent times.
Unimpressive Price Performance
We note that the Allegiant stock has performed disappointingly even before the damaging report went public. Notably, the stock has declined 16.9% in the past month.
In fact, until clarity on the above issue is obtained, shares of this low-cost carrier might continue declining in the coming days.
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion - more than a 3,800% increase in the previous 12 months. They're now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market. Click here to access these stocks >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United Continental Holdings, Inc. (UAL): Free Stock Analysis Report Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report Allegiant Travel Company (ALGT): Free Stock Analysis Report Alaska Air Group, Inc. (ALK): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research