This post will focus on my
interpretation of Breeze Aviation Group's Part 121 application currently under
the Department of Transportation review. It is essential to understand that,
while my beliefs are research-based, there is enough gray area in Breeze's
application that my analysis should not be taken as absolute fact. Further,
even if my interpretation is 100% correct (it won't be), by the time the
airline actually flies within the next year or so, the dynamic nature of the
industry could materially change Breeze's tactical market decisions.
On February 10th, Breeze Aviation
Group's Part 121 (air carrier) application was posted on regulations.gov. For
those interested in reading route cases, applications, and generally dull
documents, this is the site for you. However, while much of the Breeze's
application was (extremely) dry, there were more than a few nuggets, which, for
us aviation dorks, were quite interesting. Today's post will analyze those
nuggets and provide my best guess at what Breeze's network may look like within
the first few months of launch.
Let's first talk about Breeze's
timeline. In the filing, Breeze makes it incredibly clear they are requesting
an expedited application process.
"Breeze requests that this application be processed by the use of expedited non-hearing procedures. The use of expedited procedures will serve the public interest by facilitating the introduction of Breeze's innovative services as soon as possible" (pg 6)
The expedited request should not
come as a surprise. I assume that any application would request something
similar, but Breeze has assembled a highly experienced group of professionals
(we will touch on this later). An expedited application request should not come
as a surprise. In April, Breeze will start taking delivery of their sub-leased
E195s (~2 per month) from Azul and by April 2021, their C Series aircraft will
also begin to be delivered (1 per month). (page 122). Once the aircraft
start to be delivered, costs can escalate quickly. As soon as aircraft
expenses start being accrued, Breeze will see a 10% increase in total operating
expenses (this excludes capital expenses associated with aircraft delivery and
inductions).
So, if Breeze hopes to get off the
ground quickly, when are they expecting to launch the airline? Based on their
provided financial data (pages 131 & 143), I believe they are planning to
get Part 121 approval around August 2020. From there, Breeze is expecting to
use its aircraft to operate charter missions for 1-3 months before the
scheduled service would begin. This could mean schedule service would start
around November 2020.
Turning towards the growth front, it
appears Breeze's capacity deployment might be more modest than JetBlue's
original launch. In trying to compare apples to apples, I took a look at
JetBlue's system block hours from their initial start and compared it to
Breeze's scheduled service launch. With this, we can see Breeze's growth is at
least planned to be much more modest than JetBlue.
This might be a fallacy to compare
the system block hours between the two, however. Breeze's application makes it
clear they are looking to operate with low utilization values. In all the
schedules provided by Breeze, the scheduled service utilization barely cracks
seven hours. JetBlue, on the other hand, likely had a much higher utilization
with their fleet. (Note: I do not have OTP data back that far to calculate
utilization for JetBlue).
But where exactly is Breeze likely
to operate? There are a lot of hints in the application. However, it is
important to remember, in the deregulated airline industry, once a carrier
receives their certificate, there are not many limitations preventing the airline
from picking up their operation and moving to the other side of the country. I
say this as the next section is entirely my game theory of
where I would fit the pieces of Breeze's application to fit their discussed
strategies, maintenance, and schedules. Exactly how Breeze constructs their
network may (will likely) be materially different.
Here are the guardrails for Breeze's
network:
- Mid-sized markets (pg 2)
- Underserved markets without nonstop service (pg 5)
- Line maintenance in ISP and/or other locations as the
carrier grows (pg 6)
- The first four cities and three markets will be leisure
north-south markets (pg 6)
- Cities will be attractive for secondary leisure markets
or second homeowners (pg 6)
- The first aircraft will be E190s
There are two areas in the
application we can focus our analysis on guessing Breeze's phase one service
offering. First, Breeze offered their schedule with the cities covered. Each
route has a provided block time associated with it (pg 134).
Next, we can turn toward their
projected system-level metrics (pg 149). These projected statistics begin as
soon as the carrier starts its charter services. So we have to skip to month
four when we expect Breeze's scheduled service to begin. Based on this
information, we would expect the average stage length to be 1,039 miles.
For all of my analyses, I anchor ISP
as at least one point on their network. Why? Well, here's what Breeze states in
their application regarding maintenance:
For FAA certification, Breeze will conduct line maintenance at its facility in Islip, New York (“ISP”) and has contracted with Embraer in Nashville, Tennessee for heavy maintenance. As the route system grows, Breeze will use a mix of contract and in-house maintenance providers. At all times maintenance will be conducted in accordance with Breeze’s FAA-approved maintenance program.
Line maintenance is a defined term by the FAA. From one of the
FAA's web-based training modules:
Includes routine and non-routine maintenance, bench checks, calibration, and repairs accomplished in support of day-to-day aircraft operations.
In theory, a line maintenance
station would likely be on the carrier's network to route aircraft through for
routine maintenance. This, however, could be the fallacy in my analysis. Breeze
does state they could use a mix on other providers, which could be in any of
their cities. While unlikely, Breeze could plan to use their charter division
to route aircraft to/from ISP for maintenance.
Next, I focused first on block
times. Block generally points to the route distance. Using the DOT on-time
performance data, we can see how the E190s are currently being operated today. Typically,
we see block times include 15 minutes for the aircraft to taxi out and 5
minutes to taxi in as part of their block times.
Once we removed the assumed taxi
out/in times, we can then plot the flight times vs other observed E190s
flights. Note, these are directionally average, so east/west flying shows as
their average. Using this data, we can estimate the route routes would be similar
in stage length ranging from around 970 miles to 1,090 miles.
There are then three different options you could see Breeze deploy in phase one. This is where the real game theory starts. As a planner, it is crucial to understand the company's strategy to make tactical decisions. Is the company looking to concentrate at one leisure destination, one origin market, or two markets in the north and two in the south?
My initial impression on the
application was ISP would be a focus city, but this was quickly proved wrong. A
very reasonable service pattern can be developed matching the block times and
the 1,039 mileage statistic. However, service from ISP to MCO, TPA, and MIA
area all competitive markets out of ISP, which Breeze stated they would avoid.
Further, none of Florida cities would likely be considered "secondary
leisure destinations".
Next, I examined the potential of
Breeze turning all flights from a single Florida city to ISP and two other
Northeast cities. In total, there were roughly 490,000 route pairings for three
markets to/from any Florida airport with service to any Northeast market with
service. We further isolated these pairing where ISP had to be a turn and the
mileage had to equal 1,039 average stage length. There were still 55 possible
route pairing.
The problem I have with this
solution is State College (SCE) is not a medium-sized city that Breeze
describes as their target.
So I took a look at the phase two
expansion schedule which, to me hinted at a two north/two south split. Why? In
the narrative, Breeze states:
In early 2021, Breeze plans to introduce more service east of the Mississippi river with flights from existing destinations to points in the Southeast and mid-Atlantic region (pg 131).
During this time, Breeze's
statistics pages show only two new destinations are planned to be added. Since
the mid-Atlantic is not in the central timezone, it is safe to assume all these
time zone crossings would tie to the new southeast city.
If we assume the aircraft 1 & 2
are the original service, we can expect the new southeast city would connect to
at least two, maybe three Florida markets since the application continues to
reference secondary leisure markets. While I am not going to speculate on the southeast city, phase two caused me to recalculate my view on phase
one. Why? Whatever the new southeast city is, it appears that they should expect roughly two flights a day and it is not likely a two hour block time could easily reach the northeast from a southeast city.
So where should we go from here for additional guidance? For those paying attention this week, the Department of Transportation finally released the Small Community Air Service grants. While I often believe many of these applications are pipe dreams, one unawarded proposal caught my eye. New Haven, Connecticut submitted a proposal that specifically called out Breeze Aviation in their application which was sent back in July.
So where should we go from here for additional guidance? For those paying attention this week, the Department of Transportation finally released the Small Community Air Service grants. While I often believe many of these applications are pipe dreams, one unawarded proposal caught my eye. New Haven, Connecticut submitted a proposal that specifically called out Breeze Aviation in their application which was sent back in July.
If we believe New Haven's
application to be as serious as HVN attempts to demonstrate, phase one could be
a little more clear, especially if we believe in a two-city north and two-city
south set up. In their application it is clear to me they have had serious
conversations with the carrier.
An HVN-SRQ, ISP-SFB, and ISP-SRQ
would meet all of the objectives set out in Breeze's application. The only
thing that might not wholly reconcilable is HVN's assumption of A220 (C-Series)
service versus Breeze's initial E190 fleet.
Regardless of precisely what Breeze ends up flying, it is always exciting to see additional nonstop route offerings to cities that have been reduced to just hub service over the last couple of decades.