CEO of RDU’s newest airline says Connecticut may be just the beginning
Avelo, one of the country’s newest airlines, comes to the Triangle on Thursday with its inaugural flight from Raleigh-Durham International Airport.
Avelo will fly five times a week between RDU and Tweed New Haven Airport, its East Coast base in Connecticut. The airline, the 13th with service from RDU, plans to continue the route year around, though potentially adjusting the frequency to match demand.
Avelo (rhymes with “hello”) is one of two low-cost carriers, along with Breeze Airways, that began flying in the spring of 2021, as the airline industry was struggling to recover from the most significant downturn in its history.
Air travel has slowly rebounded during the COVID-19 pandemic, though now Avelo and other carriers face a new challenge in soaring costs for jet fuel.
Avelo is almost two airlines in one. It serves 15 cities in the eastern third of the country and 12 destinations out west, mostly from New Haven and its West Coast base at Hollywood Burbank Airport. The east and west operations use different planes (Boeing 737-700s in the east, 737-800s in the west) and don’t overlap.
But they follow the company’s strategy of flying exclusive routes, often to secondary airports in large metro areas.
Avelo’s founder and CEO, Andrew Levy, helped start Allegiant Air, another low-cost carrier, and spent 14 years with that company before becoming chief financial officer at United. Levy spoke with The News & Observer about the company’s business model and why he thinks RDU is a good fit.
Q: How is business?
A: Business has been really good with the exception of this fuel spike. We were on plan through the first quarter and feeling really good about what we were seeing. But as the quarter progressed — and it started before the invasion in Ukraine, but certainly post invasion — we’ve seen just a violent increase in jet fuel prices, far in excess of what crude oil has done. .... Obviously it’s put a little bit of pain in the short term because it’s really hard to adjust your revenue up that much that fast to be able to handle that. But over time, you’re able to adjust your business and people are able to adjust what they’re willing to spend for travel. ... Summer demand looks really good. Our bookings are really strong. And so we feel good about it.
Q: Do you think you’ll be able to pass along some of the fuel costs?
A: Yeah, we have to. It’s just a question of how long does it take to do it, because you can’t just magically take up your prices whenever you think you need to. ... First of all, fuel prices are high in part because it’s a strong economy. And people are able to pay more, and there’s demand for the product, so that’s part of it. ... But what happens typically, and we’re doing this as well, is that you start to take some flights out of the market because that gives you the best chance to increase your revenues by constricting supply, and that type of decision-making is occurring across the airline industry. So marginal seats are coming out because everybody needs to take revenues higher. So strong economy helps, and then adjusting capacity helps as well.
Q: What is Avelo’s business strategy?
A: First and foremost our strategy is offering service between two city pairs that didn’t have it before. We’re trying to do something unique and different. We’re not trying to completely out compete the other guys by doing the same thing. So our flight to New Haven is a great example. I mean, we’re the only game in town in New Haven. And certainly nobody flies this route except for us. And so every route we’ve announced, since we started our business with the exception of one, had no competition on it before we announced our service. ....Our business is about offering something different and new and something that’s low cost and hopefully very convenient for people and easy to use. New Haven is a good example. It’s an airport that had had very little service over the last several decades. But it’s a market that has a ton of potential.
Q: So how does RDU fit in with with your strategy? Why did you want to be here?
A: Obviously, it’s a huge growing community. And, certainly, based on historical demand patterns in the Connecticut area — both the New York metro as well as the Hartford areas — it certainly seemed like there was a market that had a good chance of working and working well. And our advanced bookings certainly show that it’s going to be a really good performer for us. We’re excited to get started, and we’ll start with New Haven, and then we’ll go from there. We have a number of other airports we’re looking at that are kind of similar to New Haven that are up in the Northeast and Midwest. ... Over time, I hope we can expand and offer a lot more service to New Haven as well as service to other points where RDU has none today. But first things first, we got to start this one and make this one work and work really well.
Q: RDU has a fair number of airlines, 13 now. We have several low-cost carriers. How does that factor into your strategy?
A: Our business is really not about trying to beat the other guy in the market. That’s just not anything that I think is really interesting, and I don’t think it’s really a very good business. So if you have service to Orlando, which I’m sure you do, it’s pretty unlikely that we’ll add service to Orlando because we’re not really able to add anything that’s different or new. No one has service to New Haven. So I feel pretty good about that one. And there’s other markets like that that are out there that I expect we will go into over time that will offer us the ability to add service into Raleigh-Durham, and these are markets that nobody else serves.
Q: You plan to fly into RDU year-around, not seasonally?
A: Our thinking is that this is a market that should be a good market year round. Yale University up in New Haven has a huge medical business, and there’s a big biotech community up there in Connecticut. And I know Raleigh has a lot of businesses that are in that same sector. So I know this was one of the routes that we have started that the business community was very excited to take advantage of and hopefully more people find it to be really useful for them. And obviously that type of traffic is a little bit more of a year round customer. So we’ll see if that proves to be the case. But I know there’s a lot of excitement about our service to RDU up in that part of the world.
