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New generation of budget airlines aims to disrupt flying

Date: May 11, 2022

By Joann Muller, author of Axios What's Next

New airlines don't come along very often, but the pandemic provided a rare opportunity for new carriers to establish themselves in smaller markets that had been abandoned by the major airlines in recent years.

Why it matters: Startups like Breeze Airways and Avelo Airlines represent a new generation of low-frills carriers that aim to disrupt the status quo just as Jet Blue and Southwest Airlines did decades earlier.

  • They're using technology as a differentiator — in addition to low fares and convenient routes.

Driving the news: Several de novo airlines were born during the pandemic, taking advantage of the near-shutdown of air travel that brought the big-name carriers to their knees not long ago.

The newcomers have grown quickly, adding new, larger planes and more nonstop routes to bigger cities:

  • Breeze, which launched a year ago mostly on the East Coast, is now offering $99 one-way fares to Los Angeles, San Francisco and Las Vegas. And it just announced service from Westchester County Airport, a popular alternative to New York's three busy airports.
  • Avelo, which started last year on the West Coast, is now adding routes such as New Haven, Conn.,-to-Orlando, Fla.
  • PLAY, an Icelandic airline launched last year, is offering cheap flights to Europe, through Reykjavik, from Baltimore/Washington, D.C., Boston, New York and Orlando.

The tech angle: Breeze was the brainchild of David Neeleman — who also founded JetBlue and other airlines — and it's taking a "tech-first" approach to customer service.

  • You have to book and manage your flights through an app — there is no toll-free customer service number.
  • Passengers communicate with Breeze representatives solely via text, chat or Facebook messenger.
  • Each service agent manages multiple text conversations at once.
    • The company says this makes response times faster than they would be if passengers were holding on the telephone.
    • Customers usually connect with an agent within 5 to 10 minutes, a company spokesperson says, adding that conversations are typically resolved within 20 minutes.

Yes, but: The remote encounters don't sit well with everyone, as complaints on the company's Facebook page indicate, notes USA Today.

Reality check: It wasn't easy for any of these airlines to launch during the pandemic, which effectively killed the travel industry.

  • "It delayed us a good year or so, but that was the main downside," Neeleman, the CEO, tells Axios via email.
  • "On the other hand, the pandemic exacerbated the reduction of airline services that secondary and tertiary markets had been experiencing for the last five years. So, if anything, it gave us more opportunities there."

The big picture: Low-cost carriers swooping in to undercut the industry leaders "is a play we’ve seen before," said Adam Gordon, managing director and partner at Boston Consulting Group, who leads the firm's airline practice.

  • Discount carriers take advantage of their lower cost of operations: newer planes with low maintenance requirements, lower labor rates and simple business models, for example. (Think Spirit, Allegiant and Frontier.)
  • "As they mature, their labor costs tend to rise, the aircraft need more maintenance, and it all gets more complex. That creates space for new players to come in beneath them."

Flashback: JetBlue, born in February 2000, stood out for its low fares, new planes and passenger amenities like seatback screens, satellite television and free Wi-Fi.

  • Other airlines were forced to respond by adding similar amenities. Many also adopted the tiered pricing structure for economy seats that discount airlines pioneered.

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