Wed. Sep 28th, 2022

Avelo Airlines launched in April 2021, in the heart of the COVID-19 pandemic. The timing for a new airline, the first in the U.S. in 15 years, was hardly ideal. Yet the low-cost airline has successfully operated for more than a year, from three bases in Orlando, FL, (MCO), Burbank, CA (BUR), and New Haven, CT (HVN) serving twenty-five destinations.

Avelo says it will eventually serve one million passengers through its base in Orlando, creating 500 jobs and $1 billion in regional economic impact. We caught up with Avelo CEO Andrew Levy about the airline’s wild ride and its plans going forward.

Forbes: The last time we talked was in April 2021, on Avelo Flight 001 from Burbank to Santa Rosa, CA. How did your first year go?

Levy: Mostly good, it’s been a process of building a brand. The Delta variant and then Omicron didn’t help. Now we have been dealing with elevated fuel prices that took a leg up when Mr. Putin started his little adventure. There have been adjustments along the way, but we are doing well.

California was the most bunkered down area in the United States but is now ready to travel. We are excited about demand from Wilmington, NC a growing retirement community. We serve it from BWI, New Haven and now Orlando.

We have nine airplanes and a tenth joining the fleet soon, six Boeing 737-700s and four 737-800s. Six more are coming by 2023. The aircraft operate out of our bases, New Haven, Burbank, and Orlando, where they return each night.

Forbes: Airlines keeps talking about a pilot shortage. How is Avelo dealing with it?

Levy: We had to modify our compensation package early this year, took it up, and for now that has done the trick. We have had to raise our comp for airport operations, mechanics, and flight attendants as well. We are not having problems recruiting or retaining.

We have a small company—pilots can move into the captain’s seat very fast, get in that left seat quickly. We’re a startup, so getting a high seniority number that gives you flexibility over your schedule is also important.

Our pilots can go home and sleep in their bed every night. For those that live elsewhere, we are paying a commuting stipend as part of their compensation.

Flight attendants are a much easier group to hire for. It is a job that people attracted to. We can offer flexibility and a lot of benefits, including travel.

Forbes: How is Avel’s load factor (percentage of seats filled)?

Levy: Our load factor has been in the seventies and eighties for the last six months. We hit the high seventies in November, and we have crested eighty, which we’ll be at in July.

(He added that the arrival of the Boeing 737-800 with larger seating capability on the company’s East Coast routes will be helpful, as the flights from Connecticut to the six Florida destinations have been popular.)

Forbes: One of your initial destinations was Bozeman, Montana, the gateway to Yellowstone National Park. No more?

Levy: About 80% of our service there was taking travelers out of Burbank. But in Bozeman, they told us, they could not get a rental car and the hotels were full. So, we got out after last summer. We looked to come back this summer, but we could not find labor for our operation.

Forbes: So what are Avelo’s most successful destinations?

Levy: Until the last couple of months, our biggest market was Burbank to Santa Rosa (Northern California wine country.) That has been eclipsed by Orlando to New Haven; we often have three flights a day.

Many people are commuting from Florida or have established residency there. [Avelo serves six cities in Florida.] So, there is more frequency of travel, there’s tax flight from the higher tax state, and people working remotely, in addition to leisure travel.

There is a huge amount of demand in South Connecticut. New Haven Tweed is a really easy airport to get in and out of. It’s one of the biggest parts of our network, with six flights a day to places like Savannah, Raleigh, Chicago Midway and Florida.

Forbes: Why has New Haven proved so successful?

Levy: Much of our customer base lives in Connecticut. That is our core traveler. We have found a huge market of affluent people who travel a lot and don’t like to schlep to LaGuardia or JFK. Tweed is a far more convenient alternative. Avelo is known in Connecticut, we have huge awareness there.

Forbes: Looking at an Avelo route map, it’s like a pair of matching vertical ovals. There’s an East Coast oval and a West Coast oval. Will they connect one day so customers can fly coast to coast?

Levy: We’ll see. Right now, there are many other opportunities, like in and out of our six airports in Florida. There are also potential international opportunities, like flights to Toronto from New Haven, and to Mexico or the Caribbean as well. We are a flag carrier, so we have the designations, but it is certainly more complex.

Forbes: What does Avelo’s financial playbook call for? An IPO? Acquisition by a larger airline?

Levy: My goal is to build a great business. An IPO is very possible in our future. As for acquisition, it’s not a goal of mine. As a private company we’re not interested. But if someone wants to knock on our door and give us a bunch of money, you listen.

You don’t need to get bigger to survive. My old company Allegiant is still crushing it on its own. Bigger is not better, better is better.

Forbes: How is Avelo doing financially?

In April we would have actually made money if jet fuel was what we had budgeted in December. Instead, it was up two dollars a gallon. We forecast we would make money starting in July, and we can make it, even if it remains $5 a gallon.

We need a little more scale. It would be nice if fuel prices stepped back. Still, we are up to about 40 flights a day. We are focused on convenience, reliability, growth.

Forbes: The airline industry is grappling with delays and cancellations. How is Avelo doing?

Levy: In terms of completion factor, in 14 months, we are flown about 7000 flights with a 99% completion factor, or 1% cancellations. We had 2228 flights this quarter, we cancelled just nine.

In terms of on-time performance, it’s been tough. With weather and air traffic controls, we are sitting at 71%. There has been a ton of congestion, traffic to and from Florida as well as staffing issues at the FAA, ATC, etc. When we have tough days, we try to apologize quickly and fully.

We have no change fees and no cancel fees. And since we are cancelling so few flights, most people get to travel when they want.

Our people hire folks and give them the training and tools from scratch they need to succeed. We get great feedback about our flight attendants, for example.

Forbes: So, it sounds like you are building customer loyalty. Do you have a loyalty program—points and miles, credit cards and so forth?

Levy: We will do loyalty in 2023. Right now, we get loyalty the hard way, by providing service and value, without that ‘spiff’ of points to keep people with us.

We try to keep it real simple—one class of service. [All coach.] If you want more legroom, or priority boarding, or luggage, we merchandise these optional services.

But we offer just one class of service. It’s all first class, as I like to say.

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