New U.S. Airline Avelo Enters Competitive Travel Market

Airline entrepreneurs are betting that the pandemic has created opportunities

Wall Street Journal 

By Alison Sider

April 8, 2021 5:30 am ET

A new airline is launching, bringing more competition to a domestic travel market that was ravaged by the coronavirus pandemic but has been showing signs of revival in recent months.

Avelo Airlines aims to serve smaller airports and routes that it says larger carriers have ignored or left behind. The new airline is scheduled to operate its first flight at the end of the month, flying from Burbank to Santa Rosa, Calif., and will initially serve 12 airports in western states.

Avelo was conceived before the pandemic upended the airline industry. After raising $125 million from investors in January 2020—a few months before air travel came to a near halt in the spring—the airline delayed its plan to launch until travel demand returned.

Andrew Levy, Avelo’s chief executive, said that time has come. Vaccinations have spurred a renewed appetite for vacations. Passenger volumes at U.S. airports are still down 30% to 40% from pre-pandemic levels, but airports are busier than they have been in over a year. While public health officials are discouraging people from taking trips, the Centers for Disease Control and Prevention said last week that the risks are low for those who have been fully vaccinated.

The pandemic forced thousands of businesses across the country to shut their doors but has also created opportunities to open new ones. Entrepreneurs are looking to pounce, as states lift restrictions on business activity, betting that consumers with money to burn are ready to start spending again.

The same may be true of the airline industry. While major carriers have survived the pandemic and largely avoided mass layoffs through government aid, many have had to scale back. Aircraft costs have come down, and Avelo has been able to hire staff from some of the smaller regional carriers that closed down last year, Mr. Levy said. Hollywood Burbank Airport, Avelo’s base, likely would have been too crowded to establish a beachhead of this size last year, he said.

Mr. Levy, who helped found Allegiant Travel Co. and later became chief financial officer of United Airlines Holdings Inc., began planning his new airline in 2018, when profits in the industry were still soaring. He said the general premise behind Avelo has remained intact—to fill in gaps where other airlines don’t offer nonstop flights and to service secondary airports that are often less congested and more convenient for many travelers.

“That opportunity was there before the pandemic, it’s there today,” Mr. Levy said in an interview. Avelo’s introductory fares will start at $19 each way. Like other ultradiscounters, the airline will charge fees for checked bags, carry-ons, priority boarding and seat selection. But the carrier said it wouldn’t charge change fees.

Avelo is one of two new airlines aiming to start flying within the U.S. this year. Breeze Airways, the latest venture from JetBlue Airways Corp. founder David Neeleman, received approval from the Transportation Department last month. Breeze, Mr. Neeleman’s fifth airline venture, plans to offer low-cost flights between pairs of midsize U.S. cities that currently don’t have nonstop service.

Avelo and Breeze are the first new mainline airlines in the U.S. since 2007, when Virgin America was launched.

A series of megamergers between 2008 and 2013 combined eight big carriers into four. Alaska Air Group Inc. acquired Virgin America in 2016. The wave of consolidation, coupled with a strong economy, helped fuel a decadelong streak of industry profits.

Now competition is heating up. Airlines have announced plans to fly more than 150 new domestic routes this summer, as they woo people looking to visit beaches and national parks or friends and relatives after the isolation of the past year.  Other discount airlines, including two that have raised hundreds of millions of dollars in recent initial public offerings, also have ambitious growth plans.

Mr. Levy said Avelo is planning to tap into niche routes where there is little or no direct competition. Instead of flying to Phoenix Sky Harbor International Airport, an American Airlines Group Inc. hub, Avelo will fly to the smaller Phoenix-Mesa Gateway airport, for example.

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