Three Years In: Avelo and Breeze Airlines Gear Up for Profitable Year Post-Pandemic Launch

Since the onset of the COVID-19 pandemic nearly four years ago, the landscape of air travel has undergone significant upheaval. Despite this, the largest U.S. airlines have managed to regain profitability. Now, the CEOs of two fledgling airlines, which took flight amidst the pandemic, are poised to follow suit.

Avelo and Breeze Airways, both low-cost carriers that made their debut in 2021 when U.S. air travel demand was still over 30% below pre-pandemic levels, have experienced rapid expansion in their operations.

They’ve introduced numerous new routes across the nation, with their founders emphasizing a strategy of connecting cities where competition from major carriers is less pronounced. This approach favors airports like Hollywood Burbank Airport in Los Angeles over Los Angeles International, or Islip, Long Island over New York City.

Avelo Airlines CEO Andrew Levy remarked, “When you have Goliaths, and you’re just David, it’s really hard.” According to Cirium data, Delta, American, United, and Southwest collectively control approximately three-quarters of the U.S. market.

CEO of Avelo Airlines
CEO of Avelo Airlines- Andrew Levy (Credits: The Point Guy)

Avelo claims to have served 2.3 million customers in 2023, with its planes boasting an average occupancy rate of over 80%. Breeze, on the other hand, transported more than 2.8 million travelers last year, with its flights operating at 77% capacity, as per the company’s records. Despite these achievements, both carriers remain relatively small players. For perspective, Southwest Airlines, the largest domestic carrier, accommodated over 137 million passengers in the same year.

Nonetheless, Avelo reported its first profitable quarter in the final three months of 2023, and a spokesperson for the airline anticipates a profitable year in 2024. The company’s revenue for the full year of 2023 reached $265 million, marking a 74% increase from the previous year.

Levy admitted that he had anticipated achieving profitability sooner, but factors such as soaring fuel costs amid broad inflation and the invasion of Ukraine by Russia two years ago pushed back the timeline.

Breeze Airways is also on track to achieve its first profitable year in 2024, according to CEO David Neeleman.

Henry Harteveldt, president of Atmosphere Research Group, a consulting firm specializing in the travel industry, noted that it typically takes two to four years for airlines to become profitable after their launch. Both Avelo and Breeze encountered additional hurdles common to the industry, including a surge in oil prices, disruptions in the supply chain, and shortages of pilots and air traffic controllers.

Harteveldt commended Levy’s and Neeleman’s vision and leadership, as well as the dedication of their employees, for the continued operation of the airlines amidst these challenges.

Skipping Hubs

Skipping the traditional hub-and-spoke model, both airlines have carved out a niche in the low-cost carrier market, alongside competitors like Frontier and Allegiant. These carriers offer basic fares supplemented by add-ons and flights to secondary airports.

Avelo serves approximately 50 destinations, operating from six bases, including Tweed-New Haven Airport in Connecticut and Wilmington Airport in Delaware. While many of its routes connect the Northeast with popular vacation spots in Florida and South Carolina, it also flies to destinations in California and other Western states. Expanding its reach beyond the continental U.S., Avelo commenced service to Puerto Rico in 2023 and plans to venture into international markets this year, according to Levy.

Breeze team
Profitability Goals: Avelo and Breeze aim for sustained profitability, eyeing future financial strategies and potential IPOs. (Credits: Breeze)

Breeze, founded by Neeleman, who previously launched JetBlue Airways and Brazilian carrier Azul, follows a similar approach by avoiding major hubs. It operates from around 50 airports such as Westchester County Airport in New York and Akron-Canton Airport in Ohio. Its routes cater to standard vacation destinations as well as cross-country flights from cities like Hartford, Connecticut, and Charleston, South Carolina, to destinations such as Las Vegas and Los Angeles. The airline aims to introduce international service by 2025.

Throughout this year, both Avelo and Breeze have continued to unveil new routes and destinations. Avelo, which started with 11 routes in the summer of 2021, now boasts about 75, while Breeze, which operated roughly 16 routes during the same period, currently offers around 180.

In line with industry trends, both airlines offer base fares, some priced as low as double digits, along with fees for checked luggage and advanced seat assignments. Breeze’s lowest-fare option permits travelers to bring only a personal item, but the airline also offers first-class seats and extra legroom options with additional amenities. It’s worth noting that neither airline’s base fare includes a carry-on bag.

What are the Operational Challenges?

For Avelo and Breeze, offering low airfares has intensified the impact of industry-wide cost escalations. The nationwide shortage of pilots following the pandemic, coupled with rising labor costs, has proven to be a significant challenge.

In recent years, larger airlines, with their ability to offer substantial salaries, have attracted pilots away from smaller carriers, exacerbating the shortage. David Neeleman noted, “What you really want to watch with pilots is attrition. … We had an attrition rate that was higher than we liked, and now it’s where we want it.” He also mentioned that many first officers at Breeze are in line for promotion to captain roles, which will help mitigate the shortage.

Airlines have additionally grappled with delayed aircraft deliveries and difficulties in obtaining thousands of replacement parts. Andrew Levy highlighted Avelo’s struggles with delays in the delivery of its leased used Boeing 737 aircraft. Currently, the company operates 16 planes with five more on order.

airline shipping hub
Operational Challenges: Pilot shortages, delayed aircraft deliveries, and supply chain disruptions impact airline operations. (Credits: Unsplash)

Levy emphasized the disruptions to the aviation supply chain system since the onset of COVID-19, noting that it has yet to fully recover.

Meanwhile, Breeze recently announced plans to exercise options on 10 more Airbus A220 aircraft, aiming to exclusively operate the A220 for its commercial service by the end of 2024. Currently operating 22 A220s, Breeze plans to have 32 in operation by the end of the specified period, according to Neeleman.

Regarding future financial strategies, Neeleman mentioned that Breeze aims to achieve profitability before considering options such as filing for an initial public offering (IPO). Similarly, Avelo is focused on attaining sustained profitability before contemplating an IPO. Levy expressed his lack of interest in selling the company.

While some airlines, particularly low-cost carriers, have pursued mergers in recent years to challenge the dominance of the major carriers, Neeleman and Levy both believe there is ample room for multiple players in the low-cost carrier sector. Henry Harteveldt of Atmosphere Research Group echoed this sentiment, stating, “The more competition we have in the U.S. airline industry, the better it is for the traveling public.”

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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