A new domestic airline took flight in California in April 2021. Avelo Airlines, an ultra low cost carrier (ULCC) founded by aviation industry veteran Andrew Levy, carried its first passengers on a 75-minute journey from Burbank to Santa Rosa, in California’s wine country, aboard a 189-seat Boeing 737 . that started at $19 one way along the route, fliers were offered a seat. † † but not much else. There was no in-flight wifi or entertainment system. Carry-on and checked bags both cost extra, as does reserving a seat. The only food or drink offered was a complimentary mini bottle of water.
In just over a year, Avelo has grown from 3 Boeing 737-800s to a fleet of 10 737s with Next Gens, with at least 4 more aircraft expected by the end of the year. The airline now offers more than 225 short-hop flights per week (the average journey takes less than two hours) to more than two dozen destinations, all from its three bases: Hollywood Burbank Airport in Los Angeles, Connecticut’s Tweed New Haven Airport, and Orlando International Airport. During the Memorial Day weekend, Avelo had flown more than 800,000 passengers on more than 6,500 flights.
His proposition to travelers remains as streamlined today as it was at launch: Fliers buy a low base fare — the average single ticket costs about $105 — and pay for whatever extras are. But unlike most ULCCs today, Avelo doesn’t charge extra to change or even cancel a reservation, it’s extremely reliable (the airline has canceled less than 1% of its total flights and has a timely arrival time of 82% than the industry average), and is gaining a reputation for delivering customer service. Recently, when the weather caused significant delays, passengers were not only reimbursed for their travel expenses after they arrived safely at their final destination, but also received a $100 credit. Most importantly, Levy says, Avelo is all about convenience, hopping to and from destinations that were woefully understaffed. In front of his airline’s arrival at Tweed-New Haven, its only flights going to Philadelphia; now Avelo offers nonstops to 14 airports — more than any other airline serving Connecticut, a commuter state alternative to dense New York City. It’s five minutes from the Tweed curb to the gate, including TSA screening – and that’s without Pre-Check. Compare that to the icy slow nightmare that is JFK or LaGuardia. “Our customers appreciate the simplicity of our offering,” says Levy. †No one else focuses so much on small, simple, convenient airports.†
Before Avelo launched, “there were not enough seats to meet the demand of all airlines,” Levy says. At the same time, passengers were faced with increasingly bleak options: the rising airfares and declining conveniences of legacy airlines or the often mediocre service of low-cost airlines. “We thought we could build something different and better,” he says. What he has created is an airline that is extremely efficient to operate while remaining extremely affordable and consistent for passengers – at least for now.
The timing of Avelo’s spring 2021 launch was striking, amid a global pandemic that had largely brought the entire aviation industry to its knees. “The best time to start a new airline has historically been in times of crisis,” Levy says. As legacy airlines suffer, opportunities arise for upstart.
Levy seems to thrive in times of uncertainty – an enviable trait when you’ve spent much of your working life in one of the most unforgiving industries. He started his career in 1994 with the low-cost airline ValuJet, where he competed against Delta. (ValuJet was eventually acquired by Southwest Airlines.) Levy later co-founded and eventually became president of another budget airline, Allegiant Air, just before 9/11. He pulled Allegiant out of bankruptcy after the attacks and helped steer him for nearly 14 years. After a stint as CFO of United Airlines, he decided to upgrade the budget airline experience by founding Avelo Airlines.
Levy had completed the first round of financing for Avelo in January 2020, but had not yet closed deals on aircraft, computer systems, headquarters and other foundations of a new company. That liquid capital allowed him to take advantage of a sector that was in free fall in March 2020. (Levy ended up raising more than $160 million in two rounds of funding.)
It is usually difficult for a new airline to secure gates to fly to and from busy airports. But as COVID-19 lockdowns dominated across the country in 2020 and 2021, gates became available at regional airports, including LA’s coveted Hollywood Burbank Airport, from which legacy airlines departed to focus on busier LAX. According to the International Air Transportation Associationthe number of flights between unique city pairs – i.e. a single city of origin to a single destination city – decreased by 30% globally in 2020 and still 15% in 2021 from 2019 levels. That opened the door for a challenger airline that primarily aims to serve secondary markets in areas where millions of people live.
During the height of the pandemic, major airlines also did everything they could to save their companies, from laying off staff to cutting fleets. (Airline industry revenues in 2020 were down about 60% from 2019.) “We looked at a surplus of aircraft that were significantly cheaper than before,” Levy says, “plus the availability of pilots, management professionals, and crew members who are flying with early retirement [by the pandemic]† He ducked in to buy planes and hunt down aircrews.
Levy has set up his new airline as efficiently as possible. Unlike traditional airlines’ hub-and-spoke model, which allows them to have wider networks by directing passengers to select airports, Avelo’s point-to-point model – where planes fly to the same handful of bases –saves the airline money by consolidating resources, such as maintenance teams, who can clean, refuel and inspect every aircraft every night. Avelo’s 480 crew members sleep in their own beds between shifts. This allows the airline to save on the cost of lodging and per diem for flight crews, and gives them something of a normal family life. “We’re hearing great feedback on the quality of life coming home every night, especially from crew members with families,” says Levy.
The aviation industry has not seen a new domestic ULCC launch in at least 15 years. Today, the ULCC landscape is dominated by Allegiant, Frontier, and Spirit (currently being courted by JetBlue and Frontier) – which seem to be in a race to the bottom when it comes to service and reliability. Meanwhile, major airlines are plagued by staff shortages and poor management systems, often leaving passengers stranded when weather or mechanical failure results in a cancellation. “Our business model is about keeping things simple. Food and drink and connecting flights add complexity and cost to the operation,” says Levy.
†[Levy] has proven, from ValuJet to Allegiant, that he knows what to spend money on,” said Tom Mahr, co-founder and chairman of Skyworks Capital, an investment bank and asset manager focused on aerospace. He invested in both rounds of Avelo. “He understands, for example, that people in the Northeast are used to JetBlue, with Wi-Fi and free snacks, and that they won’t fly with Avelo if it’s not cheaper and nicer.”
Avelo isn’t the only airline to rely on the low-cost model during the pandemic. Breeze Airways launched last May to transport business travelers and frequent flyers from undercrowded markets, including Huntsville, Alabama and Charleston, South Carolina, to larger cities. The airline’s first 7 newly designed Airbus 220s are configured for 36 business class seats plus an additional 90 passengers in the main cabin, but are still small enough to fly over land as they take off from the relatively short runways of the airline. regional airports. Beginning in late June, the airline will fly to LAX from Westchester County Airport in the New York metro area.
Breeze’s founding CEO is David Neeleman, who is known for launching JetBlue. “When I started JetBlue, it was a customer service company that happened to fly airplanes,” he says. “Breeze is a technology company that just happens to fly airplanes.” His cost savings come from creating an app and tech stack that allows passengers to easily book, exchange or cancel, check-in and track flights without human intervention. “We don’t even have a call center: we use chat functions. That way we save a lot of money,” he says. It’s a strategy that airline analysts say can provide even better customer service, if done correctly. Like JetBlue, Breeze has also added bells and whistles to its low-cost fares, which are often less than $400 round-trip, even nationwide. It offers two levels of cabins, has a loyalty program, and offers food and drinks, along with free streaming content and no change or cancellation fees.
Experts believe that these fledgling airlines have a good chance of success. Khalid Usman, an aviation practice partner at Oliver Wyman, a global management consultancy, says that while legacy airlines are curtailing capacity (and driving higher fares) due to labor shortages and clinging to their inefficient hub-and-spoke models, newer, more agile companies avoid many of the same headwinds. Taking advantage of secondary or underutilized airports is also a very smart strategy these days. “In a post-Covid world we see people moving to more remote locations, and if new LCCs and ULCCs can fly out of secondary airports non-stop and operate reliably, it’s a really good story,” Usman says.
Rising fuel costs are one area that could jeopardize success, but that remains a market-wide problem, Usman notes, and could be passed on to flyers if prices get too high. The key is that these startups maintain high standards of service and keep prices as low as possible. If they undermine passenger confidence on both sides, the mold is up.
Levy isn’t worried. “Avelo can’t compete with the market share, real estate or loyalty programs of a United or a Delta,” he says. “We win by being simple.”