ISTAT Jetrader - Winter 2024 - 10

PERSPECTIVES
thanks to September always being the
worst month for airlines, and especially
with our focus on leisure customers
and sizable Florida exposure. However,
we expect a very strong fourth quarter
and will have a nicely profitable year.
As a startup, our cost of capital
is high, and cash is always tight.
However, we're making great progress,
and as we continue to improve our
financial results, there will be a time
when we will transition to buying
airplanes, and that's something we'll
look forward to doing.
I like midlife aircraft. I'm a big
believer in having balance sheet
flexibility to be able to fly when you
believe it makes sense, instead of
being forced to fly more to drive low
costs mainly through utilization.
There are two approaches to
success in the low-cost airline arena.
One is to get brand-new airplanes
and just fly the crap out of them and
drive costs down that way. This is the
Frontier and Spirit approach. Then
there's the approach that we took
at Allegiant with the MD-80, which
may not have the same efficiencies,
but offers a really low capital cost
airplane. You can create a business
West Coast routes, with fewer flights
in the central U.S. How do you see
your route map evolving, and what
factors will drive your decisions on
future destinations?
AL: One of the things I learned
at Allegiant was to always have
optionality. I've seen from experience
how things can change very fast.
When we were deciding on a
headquarters location, it wasn't about
where we thought we would start our
operation. Where you think you're going
to start the company may make tons of
sense on that day, but maybe two years
later, after you raise the money and are
ready to go, whatever opportunity you
thought might be there might not even
exist anymore. The idea was to find
a location that had attributes that we
thought would be important no matter
what, and that's how we ended up in
Texas and in Houston, specifically. We
thought middle of the country, easy
place to recruit talent, lots of talent
that's already there. Then we thought
we would take advantage of whatever
opportunities present themselves, and
that's what we've done.
We started out in Burbank. We
never thought Burbank would be our
because, first of all, the deal wasn't
ready to go. And second, we thought it
made more sense to get our people and
processes in place at an airport that had
less of an operational challenge. So, we
started at Burbank, and we knew the
next one would be New Haven.
Since then, we've added other
bases in places where the opportunity
made sense. There are also a lot of
opportunities in the Midwest that are
interesting. So far, though, the best
opportunities have been the ones that
we've targeted. I view each one of
these as a self-contained little airline.
They don't interconnect, and that
doesn't bother me one bit. I like it that
way. They have to stand on their own
two feet - and each flight does, each
airplane, each base, everything has to
work independently of each other. It's a
way of keeping everything simple and
easy to understand.
Today, we operate six bases serving
49 destinations in the U.S. and abroad.
We're selling simple, basic short-haul air
transportation from Point A to Point B. Yet, what
we do, we do really well, so people know what they're
getting. As a result, people are extraordinarily happy.
that has enormous flexibility and
extremely low fixed costs in an industry
that typically comes with high fixed
costs. I prefer the flexibility we get with
737NG aircraft and the ability to create
our own efficiencies.
Jetrader: Avelo's network
predominantly focuses on East and
10 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT
first base, but during the pandemic,
there was suddenly space at an airport
that is usually hard to get into, and it's
an airport that I knew well from having
lived out West for so many years. I saw
a lot of value in it.
Our second base was New Haven,
clear on the other side of the country.
We didn't want to start in New Haven
Jetrader: Avelo has begun operating
to nearby international destinations
like Mexico and Jamaica. What
adjustments have you made to
facilitate these operations, and
how significant is the international
market to Avelo's growth? Can we
expect more distant international
routes in the future?
AL: When I bought XTRA, we had
scheduled authority, and we had flag
authority. We've been able to exercise
these rights since day one. We have
done a lot of international charter
flying, but that's supplemental to our
scheduled service. It was important
to us to get going on international
scheduled service and there's a lot of
opportunity there to fly to places you
can reach with narrowbody aircraft.
One of our values is to keep it
simple, and international does add an
element of complexity. But we think it's
worth it, and we're excited about it.
This month, we started service
to Montego Bay and Cancun. Over
time, we'll add more international
ISTAT Jetrader - Winter 2024

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