Breeze secures $200 million in new funding as Neeleman’s startup airline navigates growing pains

Aug 18, 2021

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Breeze Airways secured $200 million in Series B funding on Wednesday, the first sign of investor confidence in the startup’s business model since it began flying in late-May.

Notably, the new investor endorsements come as the airline navigates what could best be described as a turbulent operating environment — particularly for a startup.

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Breeze launched service on May 27, and announced an initial network with 39 routes between 16 U.S. cities, with two routes launching on day one, and the rest starting through the rest of May, June, and July. However, by late July, the airline was already cutting back some service.

But David Neeleman, Breeze’s founder and CEO, told TPG in an interview Wednesday that those cuts were not a sign of a problem with the business model. Instead, they were part of normal startup growing pains.

“Really it was just that we bit off a little bit more than we could chew,” said Neeleman, perhaps still best known in the U.S. for founding New York-based JetBlue in 2000. “I wanted more spare coverage in the system and wanted to be able to run the operation better.”

“It caused a little bit of discomfort, but we compensated our passengers really well. I just want to run a perfect operation,” he added.

The Breeze launch came just as the COVID-19 pandemic appeared to be in recession in the United States. The new funding round, however, comes as cases, hospitalizations and deaths are surging, driven largely by the delta variant.

Although Breeze saw a 10% decrease in bookings attributable to concerns over the variant, according to Neeleman, he said that customer confidence remains fairly resilient. For instance, a fare sale launched in response to that decrease saw bookings increase 20%, more than making up for the delta-induced drop.

“I think in the next week, or two, or three, we’re going to see the same thing here as in London,” Neeleman said, where a surge driven by the delta variant is on a downward trajectory, leading to continued reopenings.

Some epidemiological models predict a peak by sometime in September before the latest wave begins to fall.

That should coincide with solid demand that Breeze is seeing anyway for the fall months, Neeleman said.

“We’re seeing decent bookings in the fall, too, because when we started selling, people wanted to go in the summer but hotel rooms were either gone or expensive, and rental cars were hard to come by,” he said. “But now in the fall, things are more reasonable, and people are saying ‘let’s do it.'”

Read more: Neeleman’s new airline Breeze will use a ‘see how it goes’ approach to succeed. And business class — eventually

Demand for the flights — which Neeleman says Breeze stimulates by bringing nonstops to unserviced routes — should be high enough for the airline to succeed, based on the load factors it’s currently seeing.

“It depends on the routes, they’re in the 60s and 70s,” Neeleman said, referring to load factors. “Considering we started out late, we’re really happy with it.”

Neeleman previously said that Breeze’s low operating and capital cost structure means that the airline could break even with just 50 or 60 passengers aboard each flight. The Embraer 195 aircraft the airline is currently flying can seat 118 passengers, so load factors in the 60s and 70s means about 70 to 95 passengers per flight — far above that metric.

The airline will use the new funding to expand its fleet and network, Neeleman said, including purchasing more used Embraer jets, and taking delivery of the first of 60 new Airbus A220 planes on order. That first delivery is scheduled for October.

Featured photo by David Slotnick/The Points Guy

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