David Neeleman’s new airline Breeze is gearing up for takeoff in 2021 but will be flying into a difficult operating environment. Nevertheless, CEO of fellow Neeleman-founded airline, Robin Hayes of JetBlue, believes the startup will succeed. However, he’s not afraid to compete if Breeze enters his markets.
Lower fares and point-to-point will win
Despite the challenges posed by 2020, the US aviation industry is buzzing at the thought of a new entrant to its low-cost market. And this isn’t just any new entrant, but one that will fly two of the most capable aircraft in the short-haul catalog – the A220 and the E-195 – and which is headed up by serial airline founder David Neeleman.
Having taken delivery of its first Embraer in October, Breeze is gearing up for launch in 2021. Speaking at Routes Reconnected this week, JetBlue CEO Robin Hayes says he believes the airline will be a success. He said,
“I do think to the degree [Breeze] can identify markets that have not been tapped historically, if the demand is there, they can stimulate that through lower fares. I think that will be successful.”
JetBlue is the master of identifying untapped markets. Hayes noted that around 85 to 90% of JetBlue’s traffic flies point-to-point, with very little focus on connecting traffic. He says that the airline has seen a very strong preference for point-to-point travel when people can get it, and it’s a space where legacy airlines will struggle to compete on price.
What’s left for Breeze?
Although the route network for the new airline is still under wraps, Neeleman has made clear all along that this is an airline that will focus on point-to-point, underserved routes, connecting secondary airports together. In normal times, these sorts of routes are ignored by large legacy carriers, with most preferring to operate through their hubs on connecting itineraries instead.
But these are not normal times. As Hayes said in his interview, airlines are behaving a bit like a bunch of 10 year old’s playing football. Nobody is playing their position anymore; everyone’s just chasing down the ball with little regard for their traditional strategy.
With major airlines redeploying capacity onto leisure routes, many of those underserved connections are rapidly becoming rather well served indeed. Does this mean that there will be very little for Breeze to pick up once it finally gets flying underway? Hayes thinks not, and believes that, as time moves on, the legacy airlines will pull back into their own positions. He said,
“The thing is, how much do we view what’s going on at the moment as sustainable over time? I think that, if you’re an airline that has built a cost structure around a higher fare business traveller, then it’s not really practical to make the sort of returns that they need to make flying leisure fliers around.
“So it may be something that you do in the short term to generate cash. But generating cash is a temporary strategy. What you have to do at some point is get back to building margin and profitability. I do think that as the business travel market recovers, and it will, it may not be where it was, but it will recover over time, you’ll see a lot of that flying redeployed.”
It’s great to see JetBlue supporting its founder’s new venture. But what about when they come head to head? Hayes said he was not afraid to compete with Breeze, commenting,
“I’m sure we’re gonna see them. I think that we have a very clear plan that we focus on, so if they turn up into markets that we fly, we will compete with them.”