How startup airlines have found unmatched success in small markets

It can be difficult for new airlines to compete with established airlines like Delta Air Lines , American Airlines , United Airlines , and Southwest Airlines. While these airlines may have already claimed most of the busy and profitable routes, there are still crumbs to be had.

Low-cost and ultra-low-cost airlines now make up around 34% of the US airline market share (around average for the rest of the world). In 2021, the United States saw two new startup airlines enter the market: Breeze Airways and Avelo Airlines.

These small low-cost carriers have been carving niches out for themselves that have been largely overlooked by the larger legacy airlines.

While legacy carriers sometimes have a commanding grip on the slots and routes at large airports (e.g., United at Newark Liberty International Airport ), these startups are targeting smaller regional airports.

Start-up airlines (like Breeze) tend to be low-cost or ultra-low-cost airlines. Over the last few years, the trend in global aviation (for short haul or domestic routes) has been towards low-cost travel.

Of the big four, Delta, American, and United are full-service carriers while Southwest is considered a hybrid. These legacy carriers now make up around 66% of the US airline capacity - the remaining is almost all low-cost airlines .

"Aviation is unforgiving. Competition is fierce, the barriers to entry are high and success is fragile. After decades of consolidation, four large airlines control two-thirds of domestic air travel. Most of their flights take off or land at large airports, which has made their operations efficient and generally profitable. But over time, the big airlines trimmed service at smaller airports." - New York Times

Since the pandemic, low-cost carriers have increased their global share by around 13% (while, as of August 2024, legacy carriers had not fully recovered).

As Forbes puts it, "The low-cost business models are built to require fewer costs, and the endless chase for corporate business travelers significantly burdens the legacy airline cost structures.

Keeping things simple is the main way low-cost airlines keep their costs low." Passengers tend to have a love-hate relationship with low-cost carriers. While passengers like the low fares, they are often annoyed by bad service and seemingly everything costs an extra fee.

Breeze and Avelo, 2021's new low-cost carriers

Breeze and Avelo both target people traveling for fun or to visit family and friends. While Avelo is flying the Boeing 737 family of jets, Breeze is only flying the newer and smaller Airbus A220. Both are no-frills flights.

While Breeze is a low-cost airline, it also offers some extras like power outlets, different seating classes, and more. Breeze operates a fleet of 35 Airbus A220-300 with another 55 on order. It also has a modest fleet of 13 Embraer 190/195s.

Avelo is an ultra-low-cost airline that first operated charter flights as Casino Express Airlines and Xtra Airways before becoming a scheduled passenger airline. It flew its first scheduled flight under the Avelo name in April 2021. It has a fleet of 20 Boeing 737-700s and 737-800s. Avelo now flies from around 54 airports, while Breeze serves around 66 airports.

The top ten largest airlines in the United States by domestic market share are listed below. Breeze and Avelo do not make the list.

It should be noted that it has long been difficult for startup airlines to remain profitable and to survive recessions. However, these two airlines appear to be doing ok so far and they have been founded by well-known persons in the industry.

Breeze was founded by David Neeleman (who also helped found JetBlue, Morris Air, WestJet, and Azul Brazilian Airlines). Meanwhile, Avelo was founded by Mr. Levy what is the former top executive at Allegiant Air and, more notably, United Airlines.

Startup airlines often target airports around the country that the established carriers have mostly neglected. This has been termed by industry experts as the "next generation of industry structure and evolution."

These small, new carriers favor flying small to medium-sized planes between smaller or medium-sized destinations (they also avoid putting too many aircraft on the route so that they fill up the seats).

It is unclear if these airlines will be able to continue growing or if finding a niche means they remain small. The NYT quoted Lukas Johnson, the chief commercial officer at Breeze, “It’s just about the economics. You’re kind of Goldilocks. You’re the right size, for the right model, for the right price and efficiency. And that’s really where we’ve carved out a niche.”

These new airlines first started flying in 2021, and they focused on nonstop flights between destinations that were normally not connected before. What they are doing is the opposite of the traditional hub-and-spoke model that big airlines tend to employ.

Think Delta Air Line's massive hub at Atlanta (which for years has been the largest in the world). There's an expression for those flying Delta, “When you die, whether you go to heaven or hell, you have to change planes in Atlanta.”

The New York Times recently ran an article about how start-up airlines Breeze and Avelo have found a niche serving small airports. In that case study, the NYT noted five years ago that Tweed-New Haven Airport had only around half a dozen daily flights, and most of these were short-haul flights to Philadelphia provided by American Airlines.

However, now there are around 30 flights daily connecting the airport to over two dozen destinations. Indeed, in 2019 (before the pandemic), it only had around 50,000 enplanements annually, and in 2024, that number is expected to be around 500,000. In 2021 (during the pandemic), there were briefly no flights after American Airlines pulled out.

"Fly Tweed to 33 unique destinations currently served by Avelo Airlines. Traveling for business or pleasure, the journey starts simply from New Haven’s growing regional airport, HVN. Fly from HVN and connect to many destinations for less that it would cost to drive and park at our other nearest airports. These costs in time, stress, and dollars are seldom counted in the cost of travel. But they should be." - Tweed-New Haven Airport

Tweed-New Haven Regional Airport was first built in 1931 and is located just three miles southeast of Connecticut's New Haven's downtown. It is the state's secondary airport; with the primary airport serving Connecticut is Bradley International Airport.

Today it is an operating base for Breeze and Avelo. One feature that stands out is that while these two airlines now dominate the airport, they don't compete head-to-head, choosing to fly to different destinations from each other. On all their nationwide routes, they only compete on around eight of them (out of over 300 routes).

In early 2025, Breeze is planning to add more destinations (including Charleston (South Carolina), Jacksonville (Florida), Norfolk (Virginia), Raleigh/Durham (North Carolina), Richmond (Virginia), and Sarasota (Florida).

In December 2024, Simple Flying reported that Avelo is planning to launch four new flights from Tweed . Upcoming Avelo flights for 2025 include Dallas/Fort Worth (Texas) and Jacksonville (Florida), as well as a couple more seasonal destinations.

For the people of New Haven, they now enjoy far more options of flying to leisure destinations in Florida or visiting friends and family in other destinations (like Nashville). These direct flights save hours for passengers who would otherwise have to change flights.

Additionally, there can be other perks from flying out of smaller airports, as Tweed-New Haven states, "Wait times at Tweed-New Haven Airport are much shorter than at large airport terminals, but make sure to give yourself plenty of time for check-in."

Tweed is now home to one in five scheduled Avelo flights. Further underscoring how much emphasis Avelo has placed on New Haven, its second-busiest hub is Hollywood Burbank Airport near Los Angeles, and that only has around half the flights.

Just because Breeze and Avelo are small, that doesn't mean they aren't successful. They are both working to find niches connecting smaller and mostly overlooked destinations while avoiding the large hub-and-spoke model of the legacy carriers.

At smaller airports, they often don't have to worry about direct competition while also not having to worry about limited slots. Tweed is perhaps the most dramatic example of where startup airlines have moved in and transformed the airport.