Avelo Airlines is building an ultra low-cost carrier that is actually g. Is

A new domestic airline took off in California in April 2021. Avelo Airlines, an ultra low-cost carrier (ULCC) founded by aviation industry veteran Andrew Levy, carried its first passengers aboard an 189-seat Boeing 737, a 75-minute journey from Burbank to Santa Rosa, in California Wine Country. For initial fares that started at $19 one way along the route, passengers were offered a single seat. , , But not much. There was no in-flight Wi-Fi or entertainment system. Carry on and checked bags both cost extra, as was reserving a seat. The only food or drink on offer was a free mini bottle of water.

In just one year, Avalo has grown from 3 Boeing 737-800s to a fleet of 10 737s, including the next generation, with at least 4 more aircraft expected to be inducted by the end of the year. The airline now offers more than 225 short-hop flights a week (the average journey lasts less than two hours) to more than two dozen destinations, all operating from three of its bases: Hollywood Burbank Airport, Los Angeles of connecticut Tweed-New Haven Airport, and Orlando International Airport. As of Memorial Day weekend, Avelo had flown more than 800,000 passengers on more than 6,500 flights.

[Photo: courtesy of Avelo Airlines]

Its offering to travelers is as streamlined today as it was at its launch: fliers buy a low base fare – the average one-way ticket costs about $105 – and some even pay extra. But unlike most ULCCs today, Avalo doesn’t charge extra for changing or canceling reservations, it’s extremely reliable (the airline cancels less than 1% of its total flights, and its on-time arrival rate 82%, higher than the industry average), and is gaining a reputation for providing customer service. Recently, when the weather caused long delays, not only were passengers refunded their fares once they arrived safely at their final destination, but they were also given a $100 credit. Most importantly, Levy says, Avelo is about convenience, to and from destinations that were woefully under-served. prior to His airline’s arrival in Tweed-New Haven, its only flights going to Philadelphia; Now Avello 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 Tweed to Gate, which includes TSA screening—and that’s without a pre-check. Compare this to the glacial slow nightmare that is JFK or LaGuardia. “Our customers love the simplicity of our offerings,” Levy says. ,No one else is focusing on small, simple, convenient airports.,

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Andrew Levy [Photo: courtesy of Avelo Airlines]

Before Avalo was launched, “not all airlines had enough seats to meet demand,” Levy says. At the same time, travelers were faced with increasingly bleak choices: the rising airfares and dwindling convenience of legacy carriers or the often mediocre service of low-cost airlines. “We thought we could make something different and better,” he says. What they’ve built is an airline that’s highly efficient to operate while remaining affordable and consistent for passengers—at least for now.

Avelo’s. time of The launch in the spring of 2021 was typical, coming amid a global pandemic that largely brought the entire aviation industry to its knees. “The best time to start a new airline has historically been during times of crisis,” Levy says. As older airlines suffer, opportunities for upstarts emerge.

Levy seems to thrive in times of uncertainty—a deep feature when you’ve spent most of your working life in one of the industries’ most unforgivable. He began his career in 1994 at the no-frills, low-cost carrier ValuJet as it went head-to-head with Delta. (ValuJet was eventually acquired by Southwest Airlines.) Levy later became the cofounder and, eventually, president of another budget carrier, Allegiant Air, just before 9/11. He pulled Allegiant out of bankruptcy after the attacks and helped run it for nearly 14 years. After a stint as CFO of United Airlines, he decided to upgrade the budget airline experience by creating Avello Airlines.

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[Photo: courtesy of Avelo Airlines]

Levi’s closed the first round of financing for Avalo in January 2020, but had not yet struck a deal on aircraft, computing systems, headquarters and other foundations of a new business. That liquid capital allowed them to take advantage of an industry that was in free fall as of March 2020. (Levy’s eventually raised more than $160 million over the course of two rounds of funding.)

It is usually difficult to secure a door for a new airline. To fly in and out of congested airports. But as COVID-19 lockdowns nationwide in 2020 and 2021, gates became available at regional airports, including LA’s iconic Hollywood Burbank Airport, from which legacy carriers moved out to focus on busy LAX. According to the International Air Transportation Association, flights between a unique pair of cities—that is, from a single origin city to a single destination city—fell by 30% globally in 2020, and were still down 15% in 2021 from 2019 levels. This opened the door for a challenging airline that wants to serve mostly secondary markets in areas where millions of people live.

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[Photo: Lila Photo, courtesy of Avelo Airlines]

During the peak of the pandemic, even the big airlines were doing everything possible to protect their businesses, from layoffs of employees to layoffs of fleets. (The airline industry’s 2020 revenue fell nearly 60% from 2019.) “We were seeing a surplus of airplanes that were less expensive than they were physically before,” says Levy, as well as pilots, management professionals. And crew availability was pushed. in early retirement [by the pandemic]He swooped in to buy the plane and woo the flight crew.

Levy structured his new airline to be as efficient as possible. Unlike traditional airlines’ hub-and-spoke model, which allows them to have a wider network by routing passengers through select airports, Avelo’s point-to-point model—where planes fly and a single handful Across the bases-Saves the airline money by enabling them to consolidate resources such as maintenance teams, which can Clean, refuel and inspect each aircraft each night. Meanwhile, Avelo’s 480 crew members get to sleep in their beds between shifts. This allows the airline to save on flight crew’s overnight and per-day expenses, and gives them something of a normal home life. “We hear great feedback about the quality-of-life benefits of returning home every evening, especially from crew with families,” says Levy.

The airline industry hasn’t seen a new domestic mainline ULCC launch in at least 15 years. Today, the ULCC landscape is dominated by Elegant, Frontier and Spirit (Currently offered by JetBlue and Frontier) – which appears to be in a race to the bottom in terms of service and reliability. Meanwhile, major carriers have been plagued by staff shortages and poor management systems, often leaving passengers stranded when weather or mechanical failure forces cancellations. “Our business model is all about keeping things simple. Food and beverage services and connecting flights add complexity and cost to operations,” Levy says.

,[Levy] From Valujet to Elegant, has proven it knows where to spend money,” says Tom Maher, cofounder and president of SkyWorks Capital, an investment bank and asset management firm with a focus on aviation. He invested in both rounds of Avalo. “He understands, for example, that people in the Northeast are used to JetBlue with Wi-Fi and free snacks, and they won’t fly Avelo if it’s not cheap and nice.”

aVelo isn’t the only airline to bank on a lower-cost model during the pandemic. Breeze Airways launched With an eye on transporting business travelers and frequent travelers from underserved markets to major cities, including Huntsville, Alabama, and Charleston, South Carolina, last May. The airline’s first 7 redesigned Airbus 220s are configured to fit 36 ​​business-class seats and another 90 passengers in the main cabin, yet cross-country flight when taking off from the relatively short runways of regional airports. Still small enough to fill. In late June, the airline will fly to LAX from Westchester County Airport in the New York metro area.

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[Photo: courtesy of Avelo Airlines]

The founding CEO of Breeze is David Neilman, who is famous for launching JetBlue. “When I started JetBlue, it was a customer-service company that happened to fly airplanes,” he says. “Breeze is a tech company meant to fly airplanes.” Their cost savings come from building an app and a technology stack that allows travelers to easily book, switch or cancel itineraries, check in, and track flights without human interaction. “We don’t even have a call center: we use chat functions. We save a lot of money this way,” he says. It’s a strategy that aviation analysts say could also provide better customer service if executed properly. Like JetBlue, Breeze adds bells and whistles to its low-cost fares, which are often less than $400 round trip, even cross-country. It offers two tiers of cabins, has a loyalty program, and offers free streaming content and food and beverage service with no change or cancellation fees.

Experts agree that these upstarts hold good chances of career success. Where legacy carriers are reducing capacity (and raising fares more) due to labor shortages and following their inefficient hub-and-spoke model, says Khalid Usman, partner in aviation practice at global management consulting firm Oliver Wyman ), newer, more agile companies avoid many of the same obstacles. Taking advantage of secondary or under-utilized airports is also a particularly smart strategy today. “In the post-Covid world, we are seeing people moving to more remote locations, and if the new LCCs and ULCCs can fly nonstop to and from secondary airports and operate reliably, that would be a great idea.” The story is there,” says Usman.

Rising fuel costs is one area that could be hindering success, but it remains a market-wide problem, notes Osman, and can be passed on to passengers, should barrel prices inch too high. The key to these upstarts is to maintain high service standards while keeping the prices as low as possible. If they undermine passengers’ confidence on any front, the jig is up.

Levi isn’t worried. “Avello can’t compete with market share, real estate, or loyalty programs from United or Delta,” he says. “We win by being simple.”

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