David Neeleman is one of the most prolific and successful entrepreneurs in the aviation industry.
Starting in the 1980s with the creation of Morris Air, a regional carrier that was later acquired by Southwest Airlines, Neeleman is not only the founder of five different airlines but has also shaped the future of the industry by innovating with business models and product concepts.
In addition to Morris Air, WestJet in Canada, JetBlue in the US, and Azul in Brazil all bear the hallmark of David Neeleman, who has also previously been an investor in two other airlines, Portuguese flag carrier TAP and French carrier Aigle Azur.
His latest venture is Breeze Airways. Launched in 2021, Breeze is opening up new markets to air travel in the United States, by connecting small and medium-sized airports that, until now, lacked nonstop air service.
As was the case with his previous ventures, Neeleman seems to have an ability to deliver a product that is superior to existing alternatives at an affordable price.
What is his secret? In the latest instalment of our Executive Spotlight series, AeroTime spoke to Neeleman to try and find out exactly that.
[Audio snippets are selected fragments of our conversation with David Neeleman – ed. note]
I know you’re a very busy man. So, we’ll keep it short. I just wanted to start by asking you about your new venture, Breeze Airways.
In May 2023, it will be two years since the first flight, so I think it’s the right time to touch base and ask you a few things about this very exciting project that you are leading.
Right now, you are flying 143 routes all over the United States, which is quite an impressive number for a new airline. How many passengers are you carrying at the moment?
A lot! Today I am not sure, but we’ve got well over a million customers. So, it’s growing every single month, it’s really hard to keep track of it.
Every time we add an airplane, we add more routes. As of the end of this month, we’ll have, I think, 31 airplanes
And you have 80 airplanes on order?
That’s the 220s with 80 A220s. We have an additional 40 options for those airplanes. And we’re currently operating 19 Embraer E190s and 195s.
At 80 A220s plus another 40 options, we would be looking at the fleet of 120 A220s. So, what will happen with the Embraers? My understanding is that they were a kind of stopgap solution until you could get the A220s. Are they staying in the fleet? And how long will they remain?
They’ll stay in the fleet; they’ve got different missions. The 220s are, obviously, cheaper to operate, but a bit more capital expensive.
We do hundreds of charters every month, so we use the E190s on those, plus we do have a lot of routes that we’ve just [got] flights Thursdays and Fridays and Sundays and Mondays, so all those routes work for the Embraer. It’s a little more complicated, but it gives us a lot more reach.
So, looking ahead, let’s say two, three, four years from now, how big is Breeze going to be in terms of fleet? Are we talking about 130 aircraft or something like that?
Yeah, I think so, I think this would probably make some sense. Maybe five years from now we can have that many airplanes.
A lot of the Embraers staying flying have a lot to do with GE [General Electric], because the thing that is obsolete with those airplanes is the overall cost.
So, we’re working with GE to see if we can’t keep that fleet flying because the planes are still young. They’re very young, you don’t want to return a plane after flying for five years, because of the cost of an engine overhaul.
You are mainly flying routes in places where there is no competition, at least from other carriers, perhaps there is from other modes of transport. Is competition – or the absence of competition – the primary driver when you are choosing new routes?
Yes, I would say on over 90% of our routes, we have no nonstop competition. Those are routes that either had nonstop competition in the past or the cities have grown, and the air service hasn’t kept up with it.
There’s a lot of really great small and medium-sized cities that you can’t fly to at all. I’m here in San Bernardino and we have the only flights in San Bernardino, and there’s millions of people surrounding this airport. But they really forced people to go to either Ontario or LAX [Los Angeles International Airport] or to SNA, Orange County Airport [John Wayne Airport].
So, we are finding these little gems and having service out of here, you know, we serve daily service to San Francisco (SFO). We also just started service to Las Vegas [LAS] today.
And how far can this concept go until you start getting into markets that are more contested?
We can go a long way, certainly with all the planes we have on order. One of the little-known facts is that in 2010, there were over a million regional flights a year in the United States. Today, there’s a little over 500,000.
Those are movements?
Yeah, movements. And the major airlines have only picked up about 80,000 or so of those, so the net loss is about 420,000 flights. So, certainly adjusted for size, maybe a bit like half of all the services have gone away. And that’s a lot of airplanes!
I would like to ask you about the product, because I haven’t flown on Breeze yet, but I’ve been checking what you offer and the different fares by playing a little bit with your website. I’m pretty impressed by the relationship between the prices that I’ve seen, and the services on offer.
So, it seems that just as you did with JetBlue a few years ago, you have managed to challenge the, let’s say, textbook low-cost business model, coming up with these new value propositions. Obviously, you’re not going to tell us what your secret is to be able to do that, but how sustainable is this model? For example, one of the things that I saw is that you offer a lot of flexibility for a relatively low price, which is something that was the traditional trade-off. How do you define this value proposition? And how do you do it?
Well, we decided early on that we wouldn’t charge a ticket change fee because if you buy a ticket for $69 and the change fee is $75, then it’s just kind of a non-refundable ticket and we didn’t want that. We wanted people to have their credit and use it.
So, while we don’t give you a refund, we do give you credit for a future flight, and we don’t deduct that change fee. So, people just like it a lot better and we want to get people to fly. We don’t want to make people mad at us. We think it’s a better value proposition for our customers.
I was wondering whether you found a formula to have a lower cost base than other competitors out there?
Yeah, I think we do! We only have, I think, 30 employees per aircraft. So, we use a lot of contracts, people at the airports, but we’re just trying to be more efficient than everybody else, and just fly in the best markets and at the best times of the year. So, you’ll see some seasonality shifts, our fleets will kind of chase the peak travelers.
So, we do a lot of that, and we expect to get a lot more into the packaging business, all-inclusive resorts. We’re going to be doing some stuff as soon as we get authorized by the FAA [US Federal Aviation Administration – ed. note] to fly internationally, which is called “flag status”.
Actually, that’s something that I wanted to ask you about. Right now, all your network is in the US. Are you planning to go international anytime soon?
Well, yeah, we can’t do it today. But we expect over the next six months we’ll be authorized to do that. It’s a process with the FAA and that’s well underway.
And you recently announced, as well, a deal with Viasat to provide internet connectivity. What’s the status of this? How long is it going to take for this to be rolled out across the whole fleet?
The first plane is under installation now. And we’ll get two down before the summer. Then, when we hit the low season after the summer, we will do the rest of the fleet and hope to have them all up and running with internet by the end of the year.
Is it going to be a paid service, as an ancillary?
We haven’t decided yet, maybe there’ll be free aspects to it or very low cost. More and more airlines are going to. Delta went for free; JetBlue is free. If you charge even a little fare, a little price, people just don’t buy it and they don’t get the benefits. So, we want people to get the benefit of it.
You have three types of product: the “nice fare”, the “nicer” and the “nicest”. Would the nicest be comparable to a traditional business class?
It’s more than European business class. It would be more like a US domestic first class. We have little leg rests and stuff that they [the European airlines – ed. note] don’t have on their planes. So, I think it’s pretty comparable to that.
What are the next big milestones that we should be looking for?
Just more of the same. Just growing and finding good markets and taking care of our customers and getting them to fly [with] us again, and growing markets.
There’s something I wanted to ask you because you are the closest I can think of to a serial entrepreneur in aviation. You’ve founded five airlines, and you’ve invested in another two. Which airline project has been the hardest to roll out? Morris Air, WestJet, JetBlue, Azul, or Breeze Airways?
I think the most rewarding, and probably the most challenging, is Azul. We really transformed aviation. Brazil’s the fourth largest travel market in the world, domestic travel market, and to be the largest airline in that market after 14 years is really an accomplishment. So, I’m really proud of what the team has done down there.
I love being chairman of that company. I love being the founder. And it’s done remarkable things for Brazil, not just in airline travel, but also in logistics. You can get a package in 48 hours in 4,800 municipalities in Brazil delivered by us or by last mile providers.
Are you still an investor in Azul?
Yeah, I am the chairman of the board and the controlling shareholder.
I would also like to ask you about TAP Air Portugal. Are you involved with TAP anymore?
No, no, we privatized it and were doing great, but COVID came along and the government I think wanted the company back. You know, governments change, and so we sold it back.
So now it’s entirely publicly owned by the Portuguese government?
Correct.
Any other airline venture that you have in mind?
No, this is good. I’ve got my hands full.
Yeah, I think you should write a book sometime about all these very different, very interesting and, mostly, very successful airlines that you’ve built from scratch.
Maybe someday.
That would be a bestseller, I think.
I don’t know about that. Maybe on your site, but I don’t know about everywhere else!