• Business
  • Aviation

Commercial Air Travel is Broken. Two New Airlines Think They Can Fix It

9 minute read

For years leading up to the pandemic, economic good fortune was converging on “superstar” cities like San Francisco, New York, and Boston, where big companies like Amazon were setting up new offices and high-paid workers were spending money on houses, food, and services.

Now that the migration to superstar cities has slowed, if not reversed, two new airlines are betting on the idea that they can build a successful national business by focusing on the rest of the country. Both launched in 2021, the two are the first new airlines to be founded in the U.S. in 14 years.

The upcoming months will test their hypothesis. On Feb. 1, Avelo Airlines is launching its fourth base, this one in Wilmington, Del., restoring air service to the only state not currently served by a commercial airline. (Frontier left in June 2022.) Avelo, which was founded by former Allegiant president Andrew Levy, also has established bases in New Haven, Conn., Burbank, Calif., and Orlando. Later in February, Breeze Airways, run by David Neeleman, the onetime founder of JetBlue Airways, will launch new service to Vero Beach, Fla., Cincinnati, Ohio, Raleigh-Durham, N.C., and Orange County, Calif.

“I tell people all the time, ‘Hey, people in Binghampton like to go to the same places as the people who live in New York and LA—there are just fewer of those people,’” says Levy, of Avelo.

On the surface, going into under-served air markets seems like a good idea. There’s been no shortage of complaints about airlines of late; in October 2022, the last month for which data are available, complaints were three times higher than pre-pandemic levels, according to the U.S. Department of Transportation. And the consolidation that has led to just four airlines—American, Delta, United, and Southwest—controlling about 80% of the domestic market has meant that many cities have lost consistent air service in recent years. That’s partially because the big airlines have increasingly focused on a “hub and spoke” model since the airline industry was deregulated in 1978; they center their resources on a few big airports, and travelers who want to get in between two smaller airports have to transfer in a hub to get to their destination. Cincinnati’s International Airport, for instance, which is not a hub, had 73% fewer flights in 2019 than it did in 2002.

Read More: Blame the Airlines for American Inequality

That also means higher ticket prices. Often, big airlines use small, regional jets to get to smaller cities, which means fewer passengers per flight, raising the operating cost of each flight—a cost which gets passed along to the customers. Breeze and Avelo have a different model, linking non-hubs directly and using bigger planes. They’re betting travelers are sick of making multiple stops and sick of the tiny regional jets that sometimes can only be accessed by a bus from a giant airplane terminal. “We’re trying to do what the big airlines aren’t doing—like getting from Huntsville, Alabama to Las Vegas twice as fast for half the price,” says Neeleman, CEO of Breeze.

Historically, starting a new airline has rarely been a winning proposition. Since the airline industry was deregulated in 1978, only a few airline start-ups have succeeded, among them American West, which later merged with U.S. Airways (now part of American), JetBlue, and Virgin America, which was acquired by Alaska Airlines. “You can either bang your head against a wall or you can start an airline, and banging your head against the wall may be less painful,” says Henry Harteveldt, the president of Atmosphere Research Group, a market research firm. “Start-up airlines don’t have a great track record of financial success.”

About 90% of start-ups in the wider business market fail, and airlines are among the most expensive companies to start. Start-ups have to buy airplanes, recruit skilled staff, and wade through permitting and other bureaucracy. Ticket prices are so relatively low today—you can thank the falling price of oil since the 1980s and/or deregulation—that start-up airlines can’t usually charge high enough fares to recoup their costs.

Now is a particularly hard time: The volatile price of fuel since Russia’s invasion of Ukraine has made it more expensive to be an airline in the last year. On top of that, airlines are struggling with a pilot shortage caused by big airlines offering early retirements and buyouts to pilots in the beginning of the pandemic. With few new pilots entering the industry, airlines have to pay more to attract talent. The big airlines are able to pass those costs along to consumers, but anyone with fewer flights or smaller jets have trouble absorbing those costs.

Small airlines have for decades complained that bigger airlines undercut their fares in an effort to drive them out of business, but they’ve struggled to win antitrust arguments in court because lower prices are arguably good for consumers. But William McGee, a senior fellow for aviation at the American Economic Liberties Project, says there are examples of big airlines entering a market, undercutting fares, and then raising them once the smaller airlines go out of business.

“Competing in the airline business is brutal, it makes a NHL hockey fight look like a garden party,” Harteveldt says. Perversely, he says, the only way to be competitive in the airline industry is to not compete with other airlines. A new airline would have to find an underserved market that the big airlines have given up on, he says, one that has a large enough population to support service but not large enough to attract the big carriers. There are very few of those cities left.

All these factors explain why Breeze and Avelo’s first year or so has been challenging. Avelo had to raise a second round of money in late 2021 because business was slower than anticipated. Breeze also raised a second round in 2021. Both airlines have pulled out of routes; Avelo discontinued service from Arizona after American Airlines copied its route between Phoenix and Burbank, Calif. Avelo suspended operations at Loveland, Colo. in May of 2022, citing rising fuel costs; it also dropped out of Grand Junction, Colo. and Bozeman, Mont. in 2021. In late 2022, Breeze cut a route between Charleston and San Francisco, as well as one between Akron-Canton, Ohio and Hartford, Conn.

Still, both Breeze and Avelo say that the state of air travel today presents a huge opportunity. For one thing, the rising cost of flying has led big airlines to pull out of many cities—68 since April 2020 alone—opening a space that start-ups can fill. Indeed, around 90% of Avelo’s routes are between city pairs that don’t currently have service connecting them; 95% of Breeze’s are in the same category.

There are a few pandemic trends that also might benefit Breeze and Avelo. Avelo saves money by not catering flights—passengers can ask for water—and customers might not have accepted that before the pandemic, Levy says. Because Breeze flies few intercontinental flights and Avelo doesn’t fly any, they are able to recruit pilots and flight attendants who now prefer to sleep in their own beds at night and see their families more. Pilots for big airlines are often on the road, staying overnight far from home. “We have a lot of happy pilots who live in Charleston and leave in the morning and are home at night,” says Neeleman.

Breeze makes inaugural flight from LAX to New York's Westchester County.
Breeze had an inaugural flight from LAX to New York's Westchester County on November 2, 2022.Brittany Murray / MediaNews Group / via Getty Images

And as high housing costs drive some workers from the center of cities to suburbs and exurbs, airlines could see unexpected demand for air service in places where the economics didn’t work before. Breeze, for instance, serves Westchester County in New York. As some remote workers move to smaller cities, Avelo is hoping to tap into markets like Huntsville, Ala., which saw its population grow 13% since 2019, as well as New Haven, Conn.—Connecticut’s population grew slightly during the pandemic, after years of shrinking.

Avelo’s hub in New Haven, which flies to Florida, the Carolinas, Tennessee, and Chicago, has been one of the most successful new launches, says Brad DiFiore, managing director with Ailevon Pacific Aviation. Avelo had the foresight to see there was a market there when no one else did. “They found New Haven, which is a big deal—it’s a pretty large market that had not been adequately served,” he says.

The costs of operating out of those smaller airports is also lower for both airlines and for consumers. Airlines have to pay airports a fee to serve them, and as big airports like New York’s LaGuardia have embarked on giant capital projects, they’ve gotten more expensive. A rough estimate: LaGuardia’s fees add up to about $40 per passenger, Levy says, while New Haven’s Tweed Airport is almost free. “The difference in cost between using the main airport and using alternative airports is getting bigger and bigger,” Levy says.

Were Breeze and Avelo to succeed, they could provide a lifeline to smaller communities that had been cut off from air service. Once airlines leave, business and residents often do too, moving in search of somewhere more connected to the outside world.

But new airlines aren’t the only solution, DiFiore says. A company called Landline has launched bus routes between underserved air markets like Loveland, Colo., and the Denver International Airport and Duluth, Minn., and the Minneapolis-St. Paul airport. The company allows customers to bundle their trips with tickets on United Airlines and Sun Country Air, and eventually, DiFiore says, Landline’s pickup locations may have TSA screening capabilities, so passengers won’t have to go through security when they get to the big airports.

The service could be cheaper than air travel, but it has an even bigger obstacle to overcome than Breeze or Avelo: it depends on Americans being ok with riding a bus.

More Must-Reads from TIME

Contact us at letters@time.com