In 2021, we saw two new ultra low cost carriers launch service in the United States — I’m talking about Breeze Airways and Avelo Airlines. Breeze Airlines was founded by serial airline entrepreneur David Neeleman (the same guy behind...
In 2021, we saw two new ultra low cost carriers launch service in the United States — I’m talking about Breeze Airways and Avelo Airlines. Breeze Airlines was founded by serial airline entrepreneur David Neeleman (the same guy behind JetBlue), while Avelo Airlines was founded by Andrew Levy, a former Allegiant and United executive.
While neither airline is publicly traded, even privately owned airlines have to submit a Form 41 Financial Schedule with the US Department of Transportation (DOT), which has all kinds of fascinating details. Among those details are operating revenue and expenses, so you can get a sense of how an airline is doing.
I recently wrote about how Breeze has been hemorrhaging money since it launched, with no signs of things improving considerably. In the seven reported quarters since launch, the airline has lost $250 million, with only $400 million in revenue.
Several readers were curious how Avelo’s financial performance has compared, so I figured it would be interesting to look at that in this post.
Avelo Airlines is losing modest(ish) amounts of money
While Avelo Airlines isn’t profitable yet, the airline appears to be doing much better than Breeze Airways. The website enilria.com has a detailed look at Avelo’s financials over the past six reported quarters, from Q2 2022 through Q3 2023:
Quarter | Revenue | Expenses | Profit (Loss) | Margin |
Q2 2022 | $51,432,000 | $73,352,310 | ($24,920,310) | -48% |
Q3 2022 | $87,132,470 | $110,231,540 | ($23,099,070) | -27% |
Q4 2022 | $99,924,640 | $110,231,500 | ($10,306,860) | -10% |
Q1 2023 | $58,486,710 | $68,251,970 | ($9,765,260) | -17% |
Q2 2023 | $64,197,940 | $66,275,380 | ($2,077,440) | -3% |
Q3 2023 | $63,152,630 | $72,788,290 | ($9,635,660) | -15% |
Admittedly it takes some time for an airline to establish itself, and it’s expected that an airline will lose money for some amount of time after launch. Is Avelo Airlines profitable, and a smashing success? No, not quite yet. However, there’s a night and day difference between Avelo and Breeze when it comes to financials. And frankly if it weren’t for the big increase in labor costs between the time the airline launched and now, Avelo might just be profitable (or at least very close to it).
Breeze has lost around $250 million on $400 million in revenue, while Avelo has lost around $80 million on around $420 million in revenue. Most importantly, Avelo is generally trending in the right direction, with a negative operating margin in line with the established ultra low cost carriers in the market.
Honestly, it’s not a great time to be an ultra low cost carrier, as we’ve heard from executives at established carriers, like Frontier, Spirit, etc. The challenge for ultra low cost carriers is that they don’t have the same loyalty program revenue potential as the major global airlines, and they also can’t capitalize on the huge demand for long haul travel, which is where we’ve seen the most increase in demand.
Avelo Airlines is still losing money
Why is Avelo doing so much better than Breeze?
I think many people are surprised by how poorly Breeze is doing, given that David Neeleman is behind the airline. However, as I recently discussed, I think the airline is making a lot of mistakes, and I’m not sure the carrier has a terribly cohesive strategy.
What is Avelo Airlines doing right that Breeze isn’t? Well, Avelo’s founder was an executive at Allegiant, and I think he’s done a much better job adopting that business model than Breeze has. Allegiant has been the most consistently profitable ultra low cost carrier, and the airline really does sort of operate in its own world, with no direction competition.
With that in mind, I think there are a couple of things that are contributing to Avelo doing reasonably well in comparison to Breeze.
For one, Breeze picked up new, fuel efficient Airbus A220s. Meanwhile Avelo acquired used Boeing 737s. While the A220 is a lovely plane to fly as a passenger, I imagine Avelo acquired planes for much less, and therefore has a huge cost advantage. Furthermore, the 737 has a significantly higher capacity than the A220, so also has a lot more revenue potential.
I think the other thing that Avelo has done well is carving out its own niche. Breeze has primarily tried to operate in underserved markets at major airports, but there’s still quite a bit of competition there. Meanwhile Avelo has done a better job of serving markets other airlines didn’t bother with, and then adding lots of service there.
For example, the carrier has become a known airline in Burbank, and has even brought commercial service back to New Haven. This is very similar to the strategy that you’ll see at Allegiant (okay, Allegiant takes it a step further, with routes like Flint to Punta Gorda).
While I think Breeze is more or less toast (unless something radically changes), I think Avelo is on the right track as far as ultra low cost carriers go. The challenge, though, is that it’s hard to be an independent ultra low cost carrier, and other ultra low cost carriers are realizing they have to adjust their business model. So we’ll see how that plays out for Avelo.
Avelo acquired planes a lot less expensively
Bottom line
Avelo Airlines launched service in the spring of 2021, around the same time as Breeze Airways. While Breeze has had a roughly $250 million operating loss on $400 million of revenue, Avelo has had a roughly $80 million operating loss on $420 million of revenue.
As you can tell, Avelo is doing much better than Breeze. And frankly, given the huge increase in labor costs since launch, plus the way that budget leisure demand has shifted, Avelo is almost doing better than you’d expect. I’m curious to see how these two airlines continue to evolve…
What do you make of Avelo’s financials, and the carrier’s prospects of becoming profitable? Why do you think Avelo is doing so much better than Breeze?