TAKING OFF
Avelo, a new Houston airline, likes its flight plan during pandemic
Anew low-cost carrier based in Houston is taking off during one of the worst industry downturns in history, but with the hope that people will be eager to travel as the pandemic eases.
Avelo Airlines began service Wednesday with regional flights out of Burbank, Calif., to 11 destinations in the West targeting leisure travelers. While it’s headquartered in Houston, Avelo has no immediate plans to provide service to its local market, according to its founder.
Instead, the carrier will fly to secondary airports in cities such as Eugene, Ore.; Pasco, Wash.; and Odgen, Utah.
Avelo gets its start as analysts expect leisure travel to quickly pick up as more Americans become vaccinated and many make plans for longer-distance vacations for the first time in more than a year.
“Those things are going to result in a really robust pickup in travel, domestic leisure in particular, and that's the space that we're in,” said Avelo founder and CEO Andrew Levy.
Levy is the former co-founder and president of Allegiant Air.and the former chief financial officer of United Airlines.
Avelo will offer low fares for an all-coach cabin, including introductory $19 tickets for about a month in each new market.
The carrier will charge fees such as $10 to check a bag and $10 for priority boarding, $5 to reserve window or aisle seats, and $18 for a seat with extra legroom. Tickets are nonrefundable, but Avelo won’t charge passengers to change a reservation.
Houston waits
While the carrier adds about 100 jobs in Houston, it isn’t yet flying out of the nation’s fourthlargest city. Future local routes are in the company’s plans, however.
“We definitely intend to serve the Houston market and we're working on a couple of longer term ideas,” Levy said.
“But it's not in our first set of markets.”
When Avelo adds Houston to its schedule, experts say it will face difficulties providing service at Hobby or Bush Intercontinental, where United and Southwest already dominate.
“That leaves very few options available for Avelo to serve from either of those airports,” said airline industry analyst Henry Harteveldt. “It doesn't mean they can't or they won't, but it will be very difficult for them.”
Industry experts are not discounting Ellington Field as a potential home, but they say the likelihood is slim.
“Ellington is not set up for that kind of passenger service,” said Geoff Scripture, collections manager for the 1940 Air Terminal Museum at Hobby.
Houston was tapped for the carrier’s base, however, because it’s Levy’s home and because it provides a central location for Avelo, which he hopes will serve the entire country, starting with expansion to the East Coast by the end of the year.
Houston “has lots of air service and you can get to every part of the country quickly. And Texas has a great business climate,” Levy said.
Avelo’s strategy of providing service to secondary airports is not unlike how Dallas-based Southwest Airlines got its start, according to Levy.
The carrier is starting small, with three Boeing 737-800 planes and room for 189 passengers each.
The limited number of aircraft could prove to be a challenge, according to Bruce Hicks, owner of consulting firm Alliant Group/Houston and former vice president of corporate communications at Continental Airlines.
“That's going to make reliability difficult,” he said. “Any issue, and you're going to have canceled flights.”
Nevertheless, other carriers have taken notice of Avelo and have upgraded service in cities such as Phoenix and Santa Rosa, Calif.
“All the big guys have got a lot of ground to make up and are not going to look too kindly on some upstart,” said Hicks.
Industry challenges
American Airlines in August will replace the regional jets on daily flights between Phoenix and Burbank with an Airbus A319 that seats about 160, the airline said.
Alaska Airlines announced in mid-April that it will expand its service between Santa Rosa and Burbank, offering daily nonstop service between the cities beginning June 1.
“It's a tough business and we certainly don't expect to just simply walk in and not have people maybe respond to us,” Levy said.
Avelo also will face a challenge from another new budget airline offering flights between underserved airports — Breeze Airways from JetBlue founder David Neeleman. The company said on Facebook this month that it is “gearing up for launch very soon.”
The pandemic devastated air travel last year, forcing airlines to lay off or furlough tens of thousands of workers and turn to the federal government for tens of billions of dollars to stay afloat.
But some of the fallout in the industry has worked in Avelo’s favor, Levy said.
The cost of buying aircraft decreased during the pandemic as travel demand sank and the supply of planes rose.
The available workforce is plentiful after airline employees were laid off during the past year. And, Harteveldt said, the larger airlines may not have the financial strength to aggressively respond to Avelo’s encroachment with advertising, promotion and marketing.
Avelo’s advantages, however, could disappear as the industry shows signs of returning to health.
Southwest Airlines this month said it earned $116 million in the first quarter of 2021.
And in the wake of American Airlines’ $1.3 billion first-quarter loss, CEO Doug Parker spoke optimistically in an April news release: “With the momentum underway from the first quarter, we see signs of continued recovery in demand.”
Years to recover
The number of travelers passing through Transportation Security Administration checkpoints has remained at more than a million since March 11, with 1,574,228 travelers on March 28. That same day last year, 180,002 travelers passed through TSA checkpoints as the coronavirus began sweeping through the U.S.
Still, analysts say it will likely take years for the airline industry to completely recover from the pandemic, in part because business and international travel will likely remain depressed as companies embrace lower-cost video conferencing.
Meanwhile, Avelo’s Levy remains cautiously optimistic about his carrier’s chances.
“If we could just have a fraction of Southwest's success over the years,” he said, “we will have done a tremendous job.”
“If we could just have a fraction of Southwest’s success over the years, we will have done a tremendous job.” Avelo founder and CEO Andrew Levy