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Airline Tycoon David Neeleman Talks Breeze Airways Start-Up
This Friday, the world finally met the U.S.’s newest airline: Breeze Airways. Known as Moxy during the developing phases of the project, the airline is headed by no less than David Neeleman, the world-famous airline entrepreneur, founder of Morris Air, WestJet, JetBlue and Azul.
AirlineGeeks had the chance to catch up with him by phone on the day of the official launch, discussing the plans of the new company and its first steps in the American market, with the first flight planned for the end of this year.
Breeze’s Network Plan
“I don’t start an airline just for the sake of starting,” Neeleman pointed out right in his first sentence of the conversation. According to him, “there’s a need in the United States. You know, the route system of the other airlines is focused really on hubs rather than spokes.”
To address this gap, Breeze’s plan is to connect secondary cities in the U.S. that lack nonstop services, relying heavily on a point-to-point network with no competition. “[it’s] much like we got in Brazil — there were a lot of cities that didn’t have nonstop services between them, so there are about five hundred routes that we’re looking at and don’t have nonstop services,” he adds.
The Embraer 195-E1 and Why it Makes Sense
Breeze is set up to start with 28 to 30 first-generation Embraer 195s, all coming from Azul, Neeleman’s airline in Brazil. With the arrival of the much more efficient E195-E2s at the Brazilian airline, the old aircraft need to quickly find a new operator.
“Fuel is about 50 percent more expensive in Brazil. So an airplane that has lower fuel burn is more attractive to somebody like Azul. Azul flies the 195 [E1] over ten hours a day and it plans on flying the E2s 13 or 14 hours a day. So if you’re flying that much, and you’re saving 15 or 20 percent on fuel, then you can pay more for the airplane.”
In this process, Breeze came as a solution, needing an aircraft just the size of the E195. And “it’s kind of a win-win for both,” says Neeleman.
“[Azul] are actually paying more for the E1s than [for] the E2s. So they get rid of the airplanes, they get a lower cost per airplane and then we get these planes for a low cost. So if I was flying the planes twelve hours a day I’d go to the E2s, but if I’m flying three or four hours a day, and I’m getting for a lot cheaper than I can get the E2s for, then I just gotta have the E1.”
Head Start With ACMI Operations
Indeed, the low utilization will be an important aspect of Breeze’s Embraer fleet, which will operate on smaller, thinner routes, and will also serve ACMI/charter operations, a niche with “very little” strength in the U.S., says Neeleman.
“In Europe, we have a lot of airlines that fly ACMI for charters, for people, for corporations or for, you know, sports teams”, says the executive. Seeing the opportunity, he wants it to give Breeze a head start, and “the first ten airplanes or so we’re gonna go straight in the ACMI flying.”
A second phase of the airline will start when the first Airbus A220-300s start to come, with the first delivery expected for April 2021. Given the aircraft’s much higher leasing prices than of the E1s, they will need to fly much more, with Neeleman stressing “they have a completely different mission than the 195.”
“[The E195s] are going to fly three [to] four hours a day, and the 220-300s, are gonna fly 12 hours a day. So those are gonna be flying long, long thin markets”. The factor that makes the A220 the right fit to Breeze is its longer-range combined to a lower density, as he proceeds to explain.
“From Florida, we could fly those into Brazil, [as] TAP does with Azul in some points. We can work together with Azul to fly to maybe, Teresina to Orlando or whatever. We could fly a lot of places that Azul would never fly using the 220s and we could fly more hours [than the E195].”
Breeze Airways and Allegiant’s Model
A lower-utilization, strongly point-to-point network is already explored by a well-known airline in the U.S.: Allegiant Air. Asked what Breeze will do differently from Allegiant, Mr. Neeleman replied that “I think our technologies will be a lot better, [and] I think we’ll bring a better experience for the customer. We’re not going to have the middle seat — we will fly the 195s, and our trip costs are lower than Allegiant has, so we can serve markets they don’t serve.”
Neeleman even brought two senior executives from Allegiant to lead Breeze; Lukas Johnson, now Breeze’s CCO, and Trent Porter, now CFO of the start-up. Asked whether he had brought them because of their past work experience, he laughed and confirmed it. “The two principal people we brought […] had, god bless, left Allegiant for different reasons, but… they were available and so we grabbed them.”
Similarities do not stop there. When asked which aspects of Allegiant he could learn with and will use at Breeze’s business model, he couldn’t hide the influence of that airline at the start-up.
“[What] Allegiant has a spectacular job in doing is like, to break down markets that maybe have five passengers a day, and then they take it up to a hundred passengers a day.”
Breeze’s Leisure-Oriented Model
Breeze’s network, given the low-frequency routes, will be more focused on leisure markets. Neeleman says that “we’ll have certainly more leisure destinations. In some of these markets, you don’t do daily, just you know, two times a week, three times a week, four times a week.” He adds that “with the 195s, you don’t need to fly Tuesdays, Wednesdays — we’re gonna need to fly one, two days a week. So we’ve got [the] ability to take certain days off, that’s more of a leisure, leisure-focused.”
He added that Breeze will aim not only to budget passengers, but also to those who value the convenience of a non-stop service — even the premium passengers. “We’re talking about people who are making travel more convenient, and they’re travelling more often [with it].” He ended by saying that lower fares should stimulate traffic even more. “Sure if we’re charging 59 or 69 dollar fares, we’ll travel more often.”
Technology and Its Influence on Breeze’s Business Plan
Another factor that was stressed several times by Neeleman since the “Moxy” project appeared in the media was its technology focus. However, passengers should not expect anything different than what other airlines already do during the early phases of the airline. He explains it:
“The goal is, by the time we start, we’ll be the same [as other airlines]. But we don’t want everything to raise a call to reservations, so we want to be able to do our app to have total functionality. We based the company in Salt Lake City so that we could have that technology. So we want to be like Amazon or Uber, where you never have to pick your phone up to call, because it’ll have full functionality.”
Besides the convenience for the passenger of avoiding phone calls, by doing so, Breeze will also be able to bring costs down. Neeleman adds that “having the call centers full, with thousands of people, it’s so expensive. The technology can do all of that, saving us some money […] so we have an even more economic trip.”
The airline mogul also said that Breeze, with the aid of these technologies, will be able to bring the average number of employees per aircraft to a very low level. “Traditional airlines would have over a hundred employees per aircraft. Azul’s over 90, we’d like to be maybe in the 60 or 50s. We just want to be efficient.”
What Makes the Market Confident About Breeze
After four successful start-ups, David Neeleman is an icon of the airline business. Still, asked why does he believe this new project will succeed, he responded “we got these several planes and, you know, the Allegiant guys, they have a new dimension […] we have lots of JetBlue guys who have done this before, so there is confidence on this certification process. […] We have done it before.”
To conclude, he added the popular saying: “there is no greater teacher than experience. So we just have a lot of experience.”
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