Startup Air Carrier

 Avelo Airlines, a new commercial air carrier, will begin service this week from Hollywood Burbank Airport.The initial flights for the aviation startup will fly between the San Fernando Valley’s only commercial airfield and Santa Rosa in Northern California, a convenient portal to parts of the San Francisco Bay area. Flights begin April 28.Other destinations from its Burbank hub will include Redding; Bozeman, Mont.; Eugene and Medford, Ore.; Ogden, Utah; Grand Junction, Colo.; Phoenix/Mesa, Ariz.; and Pasco, Wash. Flights will range from daily to three times a week.Avelo founder and Chief Executive Andrew Levy said that all 11 of the airline’s destinations will have flights by Memorial Day. It will operate three Boeing 737-800 aircraft configured with 189 seats, Levy said.

The airline’s strategy is to fly into secondary airports in cities not served by larger air carriers, he added.

“It’s low-cost, low-fare, simple, basic, reliable and safe air transportation between two places that are short-haul travel,” Levy said in an interview with the Business Journal. “Our average trip length is just under two hours. It is about having really low fares and at the same time serving an airport that is really convenient for customers.” That was a reason why Avelo, which is headquartered in Houston, is based out of Burbank.

Hollywood Burbank is the single best example to him of a secondary airport serving a large metro area, Levy said.

“The fact that we can get into this really awesome secondary airport in the second biggest airport market in the U.S. was too good of an opportunity to not do it,” he said.

Frank Miller, executive director of the airport, said that it was exciting that Avelo selected it as its first hub.

“This decision clearly shows the importance of Hollywood Burbank to the L.A. and Southern California market – for its strategic location, and ease and convenience of travel,” Miller said in a statement.

“We are looking forward to working with Avelo as it launches its service.”Currently the airline has a special promotional fare of $19 one way for its flights. But even after the promotion ends, Avelo will maintain low fares, Levy maintained. He cited the same business model that Southwest Airlines Co. used when that Dallas-based carrier started operations some 50 years ago.The fares will be based on time of day and of the year when the flights take place.“It’s a great value proposition,” Levy said. “You save a lot of time and save a lot of money.”Michael Boyd of aviation consultancy Boyd Group International Inc.

in Evergreen, Colo., said that the question he asks regarding whether Avelo will be successful or not is if it will be able to generate enough passengers.

Boyd said he thinks the airline will generate business, largely based on the guy at the top – Levy.“You just don’t question his judgment,” Boyd said. “He’s a magician.”Levy is the former chief financial officer at United Airlines Inc. and prior to that worked at low-cost carrier Allegiant Air.Boyd predicted that many of the passengers who will fly on Avelo will like the low fares to get to Los Angeles, from say, Eugene, Ore. or Grand Junction, Colo., two of Avelo’s destinations.

“In my mind it works. How many people are familiar with Grand Junction? It is hard to get to the West Coast (from there),” Boyd said. “Getting to L.A. at very low rates, it could get a lot of people out of their La-Z-Boys.” Leisure passenger focusAvelo will focus on leisure and personal travel passengers, as opposed to the business traveler. The legacy air carriers, such as United, American Airlines Inc. and Delta Air Lines Inc., already do a good job in going after the business clientele and Avelo cannot offer them anything that they cannot get from those other airlines, Levy said. Southwest also caters to business types and already is the largest carrier at Hollywood Burbank Airport.“I have no doubt that we will have some people using us for business reasons, but those who do that will be few and far between. That is not a market that we focus on,” Levy said. “We are going after people who are budget oriented and price sensitive but at the same time we’ll offer convenience and reliability which I think appeals to all types of customers.” Jack Keady, an aviation consultant based in Playa del Rey, believes that tactic may not bring success to Avelo.

Typically, an airline will have a target of 60 percent business travelers and 40 percent leisure travelers, he said in an interview with the Business Journal.

“In the case of Bozeman or Ogden (Utah) to Burbank, there’s not much of a business market there, and what’s worse is there is probably not a first-class business market there,” Keady added. “And that is the bread and butter of a successful airline.”To achieve success, Keady said Avelo needs several things in place, stating with creating awareness of the new service; having a loyalty program; and dealing with the competition.

“Finally, there is the incredible cash drain,” Keady said. “If you are not starting with $200 million, you are not going to succeed. The cash burn is amazing.”In January of last year, Levy said he raised $125 million from private equity firms, family offices and individuals. That will be enough to get the airline started until it starts generating revenue from its paying passengers, he added.

“We have a lot of overhead, so we have to put some scale into the business,” Levy said. “It will take a little bit of time to grow into the overhead, but I hope that by the end of the year we are trending with a run rate that is a profitable flying operation. That is my expectation.” As for competition, Levy said that while Avelo indirectly goes up against other air carriers or other types of transportation, including the automobile, its main competition is a person deciding not to travel and spend their money on a new sofa instead.

“Our competition is getting the cost low enough so we can get you to take a trip you would not have taken otherwise or maybe to travel more often because it is more affordable and it’s easier and faster to do so,” he added.

Other airlines may not see it that way.Alaska Airlines, for instance, announced on April 16 that it would be starting daily nonstop service on June 1 between Santa Rosa and Burbank and flying out of the same airport used by Avelo.