Avelo Airlines CEO Andrew Levy wants airports to pay him. And he’s not just calling for local subsidies. He wants future deals to give his airline equity in the airport.
On this week’s Airlines Confidential, Charles Duncan co-hosted and highlighted the comments. Duncan had two decades at United, and was Executive Vice President of WestJet and President of Norse Atlantic.
As Duncan explains, Levy said he wants airport costs down to zero, and wants airports to pay Avelo. He says he won’t do future airport deals without an ownership stake. He also confirmed McKinney, Texas entry, said Expedia distribution has been surprisingly helpful, and complained Google Flights doesn’t surface Avelo’s secondary-airport model well.
Credit: Colin Cooke Photo via Wikimedia Commons
What he’s really saying is:
- He wants cheap airports that don’t invest heavily in infrastructure
- But that still charge heavily in facility fees that get added to tickets
- So that those fees can then be rebated to the airline
- Which means relying ideally as much as possible on taxpayer subsidies for the airport, in order to limit other spending and maximum payments back to the airline.
And that’s even before giving his airline partial ownership in an existing public asset. Airports should probably be privatized in order to fund the cities that own them. Currently there’s at least $130 billion locked up in municipally-owned assets that legally cannot transfer revenue to their communities.
Credit: Avelo Airlines
I’m not sure that the right answer is betting so heavily on Avelo as to transfer partial ownership to them – since Avelo has teetered on the brink of bankruptcy, which is why they leaned into ICE charters and selling planes to the government before picking up financing that allowed for an Embraer aircraft order.
What struck me — and I worked with Andrew at United 10 years ago, so I know him and I’ve worked with him — is that he struck me as an American version of Michael O’Leary from Ryanair. He was in front of an airport audience, and he was heavily focused on cost, saying, “All I want is a warehouse. I don’t need any artwork. I don’t need any bells and whistles.”
Apparently, even bag belts are something he doesn’t want. He literally said, “All I need is a runway and a warehouse, and I’ll provide the rest of the value.” …
[H]e confirmed that they will be entering McKinney, Texas, which of course is where you are, Scott, in the Dallas complex, later this year. …
He went on to say that he’s focused on getting airport costs down to zero, meaning zero CPE — cost per enplanement. He would even want to push, again very much in the Ryanair model, to be paid to serve airports.
And I also thought it was interesting: he said that he won’t do an airport deal in the future without an ownership stake in that airport. He said he has not achieved that yet, and so I think that probably includes McKinney, but his next airport will include an equity stake.
Credit: McKinney Airport
Levy also said he likes distributing flights through Expedia, despite the costs, but online travel agencies don’t show customers his flights when they aren’t from the same airport that the passenger is searching for. He thinks like a European low cost airline – that considers Bratislava, Slovakia to be Vienna. He wants passengers searching for Philadelphia flights to be shown Wilmington, Delaware.
[H]e said he was skeptical at first, but they are now distributing their seats on Expedia, and it’s been, in his words, surprisingly helpful as a distribution channel. So he certainly is accepting some higher costs for doing that.
He was asked what their greatest impediment is, and he actually highlighted Google Flights. Because their whole model is flying from airports like McKinney; Wilmington, Delaware, outside of Philadelphia; Lakeland, Florida, in between Orlando and Tampa; and Concord, North Carolina, just north of Charlotte. When consumers are going on Google Flights, his airports and his flights are not coming up. He’s been working hard to get that to work.
That’s pretty aggressive but Avelo has very little leverage with online travel agencies, who would face higher customer service costs (not good for them!) from passengers buying getting confused, thinking they’re buying a ticket from Philadephia because that’s what they searched for and either being disappointed or showing up at the wrong airport.
LOL. Good luck with that.
Good luck with that. If you want an ownership stake in an airport, buy it—don’t ask taxpayers to hand it over.
Any equity should come with strict conditions: performance requirements, maintenance and reinvestment obligations, and revocable rights if those aren’t met.
More importantly, existing taxpayers—who funded the asset—should be compensated. That could be done through tax rebates or fee offsets amortized over a defined period.
As proposed, this feels misguided—but it’s an interesting idea if structured the right way. What delusion…..
I mean, there are parts of this that aren’t wrong. Ultimately, all I want to do is get off an airplane and grab my bag right next to the aircraft and jump in a car or an Uber. I really don’t need all of the other stuff airports offer either, and I’m willing to bet there are millions more people like me out there.