Andrew Levy, CEO of Avelo Airlines, talks about a rocky start-up year
Avelo Airlines was launched in April 2021, in the midst of the COVID-19 pandemic. The timing for a new airline, the first in the United States in 15 years, was hardly ideal. Yet the low-cost airline has been operating successfully for over 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 Orlando base, creating 500 jobs and $1 billion in regional economic impact. We caught up with Avelo CEO Andrew Levy about the airline’s mad dash and its plans for the future.
Forbes: The last time we spoke was in April 2021, on Avelo Flight 001 from Burbank to Santa Rosa, California. How was your first year?
Sampling: Generally good, it has been a brand building process. The Delta then Omicron variant didn’t help. Now we are dealing with high fuel prices that got a head start when Mr. Putin started his little adventure. There have been adjustments along the way, but we’re doing well.
California used to be the most bunkered region in the United States, but now it’s ready to travel. We are delighted with the request from Wilmington, NC, a growing retirement community. We serve it from BWI, New Haven and now Orlando.
We have nine aircraft and a tenth soon in the fleet, six Boeing 737-700s and four 737-800s. Six more are arriving by 2023. The planes operate from our bases, New Haven, Burbank and Orlando, where they return each night.
Forbes: Airlines keep talking about a shortage of pilots. How does Avelo handle this?
Sampling: We had to change our compensation program earlier this year, we adopted it, and so far it has done the trick. We also had to increase our compensation for airport operations, mechanics and flight attendants. We don’t have any recruiting or retention issues.
We have a small company — the pilots can get into the captain’s seat very quickly, get into the left seat very quickly. We are a start-up so it is also important to get a high seniority number which gives you flexibility on your schedule.
Our pilots can go home and sleep in their beds every night. For those who live elsewhere, we pay a travel allowance as part of their pay.
Flight attendants are a much easier group to hire. It’s a job that attracts people. We can offer flexibility and many benefits, including travel.
Forbes: What is Avel’s load factor (percentage of places occupied)?
Sampling: Our load factor has been in the 70s and 80s for the past six months. We hit the high seventy in November, and we hit the high eighty, which is where we’ll be in July.
(He added that the arrival of the Boeing 737-800 with greater seating capacity on the company’s East Coast routes will help, as flights from Connecticut to all six Florida destinations have been popular.)
Forbes: One of your first destinations was Bozeman, Montana, the gateway to Yellowstone National Park. No more?
Sampling: About 80% of our service there was getting travelers out of Burbank. But in Bozeman, they told us, they couldn’t rent a car and the hotels were full. So we went out after last summer. We have sought to return this summer, but have been unable to find manpower for our operation.
Forbes: So, what are the most successful destinations of Avelo?
Sampling: Until the past two months, our largest market was Burbank in Santa Rosa (Northern California wine country). This was eclipsed by Orlando in New Haven; we often have three flights a day.
Many people commute from Florida or have taken up residence there. [Avelo serves six cities in Florida.] Thus, there is a greater frequency of travel, there is tax leakage from the higher-tax state and people working remotely, in addition to leisure travel.
There’s a huge demand in southern Connecticut. New Haven Tweed is a very easily accessible airport. It’s one of the largest parts of our network, with six flights a day to places like Savannah, Raleigh, Chicago Midway and Florida.
Forbes: Why has New Haven been so successful?
Sampling: A large portion of our clientele lives in Connecticut. He is our main traveler. We found a huge market of affluent people who travel a lot and don’t like going to LaGuardia or JFK. Tweed is a much more practical alternative. Avelo is known in Connecticut, we have a huge reputation there.
Forbes: Looking at an Avelo route map is like a pair of matching vertical ovals. There is an east coast oval and a west coast oval. Will they ever connect so customers can fly coast to coast?
Sampling: We will see. Currently, there are many other opportunities, such as entering and exiting our six airports in Florida. There are also potential international opportunities, such as flights to Toronto from New Haven, as well as to Mexico or the Caribbean. We are standard bearers, so we have the designations, but it is certainly more complex.
Forbes: What does the Avelo financial manual require? An IPO? Takeover by a major airline?
Sampling: My goal is to create a great business. An IPO is very possible in our future. As for the acquisition, it is not my objective. As a private company, we are not interested. But if someone wants to knock on our door and give us a lot of money, you listen.
You don’t need to get fat 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 the jet fuel had been what we expected in December. Instead, it went up two dollars a gallon. We anticipate making money starting in July, and we can make it, even with $5 a gallon left.
We need a little more scale. It would be nice if fuel prices went down. Still, we’re up to about 40 flights a day. We focus on convenience, reliability and growth.
Forbes: The airline industry is struggling with delays and cancellations. How is Avélo?
Sampling: In terms of completion factor, in 14 months we have flown around 7,000 flights with a completion factor of 99%, or 1% cancellations. We had 2,228 flights this quarter, we only canceled nine.
In terms of punctuality, it was difficult. With weather and air traffic controls, we’re sitting at 71%. There was a ton of congestion, traffic to and from Florida as well as personnel issues at the FAA, ATC, etc. When we have difficult days, we try to apologize quickly and fully.
We have no change fees and no cancellation fees. And since we are canceling so few flights, most people travel when they want.
Our people hire people and give them the training and tools they need to succeed. We get great feedback about our flight attendants, for example.
Forbes: So it looks like you’re building customer loyalty. Do you have a loyalty program (points and miles, credit cards, etc.)?
Sampling: We’ll do loyalty in 2023. Right now, we get loyalty the hard way, by delivering service and value, without that points spiff to keep people with us.
We try to keep it very simple – one class of service. [All coach.] If you want more leg room, priority boarding or luggage, we market them optional services.
But we only offer one class of service. Everything is first class, as I like to say.