Avelo Airlines moved into the black in the fourth quarter. The 16-jet privately-held carrier did not provide a specific number but issued the following;
- In 2023, Avelo flew 2.3 million customers, generating $265 million in revenue – up 74% from 2022. Wilmington (ILG) accounted for about a quarter of a million customers.
- Avelo ended 2023 with a pre-tax profit for its fourth quarter.
- Despite high fuel prices, Avelo’s record monthly pre-tax margin in December 2023 contributed to the company’s Q4 earnings milestone.
- For 2023, Avelo improved its pretax margin by 15% compared to 2022.
The Enilria airline route site noted that Avelo beat rival start-up airline Breeze by at least a year in moving into the profit column and did so despite a United Airlines executive claiming that ultra-low fare carriers cannot make a profit in the current environment.
Avelo squares off in the regional market against ultra-low fare carriers Spirit and Frontier, both of which operate out of Philadelphia International Airport and at Baltimore/Washington Marshall. Like its rivals, Avelo offers lower base fares, with extra charges for luggage, extra legroom, and seat assignments. Flights, mainly to Florida, are around two hours long.
Avelo offers one-class service on older jets with no beverages other than water. Rival Breeze flies new Airbus jets and smaller regional aircraft with more passenger amenities but saddles the carrier with higher operating costs that may offset lower fuel consumption.
Higher fuel costs delayed profitability
Avelo’s move toward profitability has been hindered by high fuel prices and a nationwide shortage of pilots and support staff, leading to the carrier offering higher pay.
The airline ended the year in Delaware with full planes during the Thanksgiving and Christmas holidays that kept parking spaces at a minimum. Airport manager, the Delaware River and Bay Authority bought out a lease on a nearby hotel and will demolish the structure and a long-closed restaurant to make way for more parking.
Plans are underway to upgrade the small passenger terminal with the DRBA, now armed with a $5.6 million federal grant. There is also the possibility of more funds in the future, depending on the level of airline service. The airport’s ability to attract passengers in Avelo’s first year of operation has led to speculation that a second carrier could fly into the airport.
In year two here, Avelo did reduce its seasonal schedule from ILG. It has about 40 employees at the airport, down from the peak figure of 90. The reduction brought pushback from passengers who flew the twice-weekly routes to destinations that included Greensboro, SC, and Nashville. Service to Wilmington, NC, and Myrtle Beach will resume this spring.
Avelo CEO Andrew Levy told the Philadelphia Inquirer this month that the airline may have done too much too soon at Wilmington and is taking a patient approach that includes building brand awareness.
A strong fourth quarter
In announcing the profit Levy said, “Achieving our first profitable quarter is an exciting and significant milestone in Avelo’s journey. I am confident Avelo’s strong liquidity position, ongoing margin improvement, healthy revenue outlook, industry-leading reliability, and rigorous cost discipline will deliver our first profitable year in 2024. As we approach Avelo’s third anniversary, I am very bullish about our future and the substantial opportunities ahead of us. I am especially appreciative of our dedicated 1,000 Avelo Crewmembers whose One Crew teamwork and friendly Customer focus will ensure Avelo continues to thrive in 2024 and beyond.”
For those wishing to drill down on the airline financials, Avelo reported it has the lowest cost structure of any U.S. airline. In the third quarter of 2023, Avelo reported a 6.9 cent cost per average seat mile excluding fuel – the lowest in the U.S. airline industry. A release stated that this improved further in the final quarter to 6.6 cents, again one of the industry’s best figures. Avelo hit the number despite flying aircraft eight hours a day or less.
The industry’s lowest operating costs
Avelo Airlines Chief Financial Officer Hunter Keay said, “Avelo’s non-fuel unit costs are half of the U.S. airline industry average, and we see this gap widening in 2024. Low costs enable low fares, which is even more important to consumers in the current high-inflation environment.”
Avelo also reported the airline ranked first in on-time performance in January and recorded the second lowest flight cancellation rate in the U.S. airline industry.
Avelo has extended its schedule until Labor Day and will offer nine destinations from Wilmington, down from a peak of 14 to 15.
This year’s focus for Avelo is Raleigh-Durham and Santa Rosa in California’s wine country, north of San Francisco. Unlike last year, twice weekly Raleigh-Durham service is not offered from Wilmington in the current schedule. Avelo also added service from its East Coast stronghold in New Haven, CT.
One question mark is Lakeland, FL, a city between Orlando and Tampa. Avelo signed a long-term lease but has announced service. There is speculation that some flights to the busy Orlando and Tampa airports might be rerouted to Lakeland. That seems unlikely for Delaware passengers, with Avelo typically offering service to Orlando four days a week.
Avelo has also indicated it plans to add four or more jets to its fleet in 2024.
