Neeleman's new airline Breeze will use a 'see how it goes' approach to succeed. And business class — eventually

When JetBlue founder David Neeleman announced the name and details of his new airline, Breeze Airways, in February 2020, the world was wide open. The economic impact of the novel coronavirus was beginning to be felt in some Asia markets, soon to be followed by parts of Europe, but everything else was brimming with potential. Airlines were flaunting expectations of another year of record-breaking travel numbers and profits. The U.S. domestic market, which Breeze would focus on, seemed untouchable.

Obviously that's not how things went. By the end of March the world was under lockdown. The airline and travel industries took a nosedive, with demand falling as much as 97% compared to the prior year.

Now, as domestic and regional travel demand surges back with a vengeance, the airline industry's outlook is brighter. Still, legacy airlines are fighting for point-to-point short-haul routes as signs increasingly point to another summer without long-haul travel. Considering all of that, this seems like an inopportune moment to start a new domestic airline.

Neeleman — who also founded Brazilian airline Azul and was previously a co-owner of TAP Portugal — disagrees. In fact, he thinks that now is the perfect time for Breeze to make its debut.

The Breeze Plan: Cheap, Efficient, and Nimble

Breeze plans to fly point-to-point between small markets, moving nimbly and adjusting to demand.

Profits on these routes are typically too marginal for big "mainline" carriers to focus on as they work to recover from the pandemic, Neeleman told TPG. But Breeze — Neeleman says — is built on a model that lowers operating costs, making margins in those same markets more significant for his new carrier.

So even though the major carriers are focusing on almost whatever point-to-point flying they can get — United recently announced a route from Milwaukee to Portland, Maine, for instance — the focus will stay on those more midsize markets.

"The airlines have more debt, less cash," Neeleman told TPG, "and their costs are still the same if not higher."

More: David Neeleman’s new airline, Breeze, just cleared a major hurdle

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"They've done a lot of things in leisure markets because leisure markets are hot right now," he added. "But usually leisure markets means large markets to small or medium-sized markets."

Breeze, on the other hand, will look at smaller markets, adopting a similar point-to-point approach as Allegiant.

"Allegiant has double the market cap they had before COVID. Sun Country just went public, they're predicting profits till 2022 or 2023. Obviously, there's a good market there for us, we're excited."

Of course, keeping costs down is essential for this plan to work.

Breeze plans to reduce costs and expedite its launch by initially leasing 118-seat Embraer E195 jets from Azul, as well as 108-seat E190s from Nordic Aviation Capital. That means low capital costs to start. The airline is starting with 13 aircraft — 10 E190s, and three E195s.

The airline is also in agreement to purchase 60 new Airbus A220-300 jets, which can hold up to 160 passengers. Neeleman said he expects the first delivery in October, with one delivery a month after that through the next few years.

The A220s will primarily operate on routes longer than two hours.

Additionally, Neeleman said Breeze will lower expenses through automation and technology. For instance, customers will be able to handle pretty much anything related to their flight through an app, something Neeleman believes will reduce the need for check-in agents and phone representatives.

"The thing that's going to benefit us is that we have really low trip costs, very low capital costs on the airplanes. Because the [older Embraers] are being obsoleted somewhat we can get parts for really cheap, cents on the dollar, so maintenance costs are low," Neeleman said.

"Our overhead costs are low. We're using a ton of technology, all of our systems talk to each other, so we don't need data entry people," he added. "We don't need big call centers with thousands of people."

Neeleman said the airline should be able to break even on each flight with just 50 to 60 passengers on board.

One question is whether Breeze will expand to larger markets — or consider connecting flights.

Neeleman's answer: Who knows?

"We've got a hundred cities we're looking it. We're not in love with any [strategy] in particular other than making money."

As far as connecting flights, it remains a possibility, but not one Breeze plans to make a core part of its model.

"We're not opposed to selling a connecting flight, it's just that our network's not going to be really conducive to that," he said. "You'll be able to do it if there's two flights, it won't be like Ryanair or something like that where it's not even possible. But you know, it'll be opportunistic, and people can do it, we'll have a fare for it if it's a reasonable connection time."

The airline will be headquartered in Salt Lake City. Its initial routes will focus primarily on four airports: Tampa (TPA); New Orleans (MSY); Charleston, South Carolina; and Norfolk, Virginia.

Business class and points-and-miles on Breeze

Neeleman plans to offer a premium product with Breeze — but not at launch.

The airline plans to install business-class seats on its A220 fleet that’s due to begin arriving this fall. Those aircraft will be reserved for longer flights, while the Embraers will handle shorter routes.

"If you go longer, you've got to have a luxury cabin and extra amenities, so our first airplanes are coming with first class seats on them," he said. "It's not going to be double the fare, it'd be adding like $50 or $100. It'd be not that much more because the cabin's so efficient."

Another start-up: New budget airline Avelo announces 12 cities, will begin flying April 28

Initially, at least, the front cabin will have standard first-class recliners in a 2-2 configuration, although Neeleman said the airline could always upgrade to lie-flat seats if that makes sense down the road.

Those seats will fall under the airline's "Nicest" fare bucket. The other two buckets — "Nice" and "Nicer" — come with a variety of features. "Nice" seats have no change or cancel fees, and allow passengers to bring just a personal item. "Nicer" seats offer extra legroom, plus a full-sized carry-on bag, a checked bag, and an included drink and snack.

The airline also plans to use in-flight sales as a revenue source, with food and beverages available. But Neeleman has big plans there for a built-in Uber Eats-like program.

"My dream is to have something where, if you're going on a long flight with us, we send you a text in the morning saying 'hey, we see you're flying today, how would you like a hot filet mignon sandwich from this great deli nearby for $19, click here and we'll charge your credit card', or whatever," he said. "There's a lot of fun things we can do with the technology."

Breeze will also launch with an in-house loyalty program.

"It's going to be pretty simple," Neeleman said. "You just earn credits, and you can use those credits on future flights."

Passengers earn 2% "BreezePoints" on Nice fares, and 4% on Nicer fares. Points can be redeemed towards future flights or ancillary products.

For now, though, the aviation world is watching to see if Neeleman will strike another success with his latest start-up effort.