April 16, 2018 / 7:16 PM / 6 months ago

Allegiant Air faces scrutiny on safety, stock drops after TV report

NEW YORK (Reuters) - The parent company of Allegiant Air on Monday faced congressional calls for an inquiry into its safety record and a sharp drop in its stock price after a report by CBS News’ “60 Minutes” alleged the airline suffers a high number of mechanical problems.

An Allegiant Air MD-83 passenger jet takes off from the Monterey airport in Monterey, California, February 26, 2012. . REUTERS/Michael Fiala

Allegiant Travel Co (ALGT.O) shares lost 3.08 percent to end at $146.40 in Monday trading on Nasdaq, rebounding from a session low of $141.65.

The “60 Minutes” segment, which aired on Sunday evening, found more than 100 “serious mechanical incidents” on the ultra-low-cost carrier between January 2016 and October 2017. The report was based on a review of U.S. Federal Aviation Administration (FAA) data and interviews with industry experts.

The report also suggested that lax FAA oversight had allowed Allegiant’s mechanical issues, including an instance of in-flight engine failure, to continue. Both the federal agency and the airline denied this was the case.

In response to the CBS report, U.S. lawmakers on Monday demanded information on how such system failures had persisted for so long.

Florida Senator Bill Nelson, the top Democrat on the committee that oversees airlines, asked the U.S. Department of Transportation inspector general to investigate how the FAA handled safety incidents involving Allegiant.

“The traveling public deserves to know whether the FAA is conducting thorough safety oversight of Allegiant,” Nelson wrote. “Anything less could lead to disastrous consequences.”

U.S. Representative Charlie Crist, a Florida Democrat, wrote separately to the Transportation Department, demanding the agency “take action to improve passenger safety,” as well as to hold Allegiant accountable for past safety failures.

In a statement, Las Vegas-based Allegiant dismissed the claims in the “60 Minutes” segment as a “false narrative,” and called suggestions of intentional regulatory violations “offensive and defamatory.”

“CBS produced a one-sided narrative by cherry-picking interviews and ignoring publicly available facts,” Allegiant’s Vice President of Operations Eric Gust said.

“Allegiant complies with all FAA requirements and participates in numerous voluntary safety programs to ensure we operate to the highest standards,” he added.

Responding to growing pressure on its regulation of Allegiant, the FAA said it was “committed to pursuing the highest level of aviation safety.”

“To that end, we welcome any outside review of our safety oversight system, and we welcome the opportunity to present a complete and accurate picture of how that system works.”

In an earlier statement, the FAA said that Allegiant’s reported incident rate has trended downward in recent years. Allegiant reported 0.0029 events per 1,000 departures in 2017.

FAA records obtained in 2016 by Alternative Research Services owner Robert MacArthur found the airline was plagued by emergency landings, failed takeoffs, engine troubles and other issues.

A Washington Post analysis at the time found that Allegiant had about nine times as many “serious incidents” from January 2015 through March 2016 as Delta Air Lines (DAL.N), the second-largest U.S. carrier, despite Delta having flown about three times as many comparable planes in the period.

Reporting by Alana Wise and David Shepardson; editing by Cynthia Osterman and G Crosse

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