Breeze Airways Losing Massive Amounts Of Money

In 2021, we saw the launch of Breeze Airways, a new ultra low cost carrier founded by serial airline entrepreneur David Neeleman (also behind JetBlue, WestJet, Azul, and more).

On the surface, the carrier’s business model seemed like a huge value-add for the traveling public — the airline primarily flies Airbus A220s in a very comfortable configuration in point-to-point markets that are underserved. Breeze is an ultra low cost carrier with a pleasant product.

As great as that sounds, so far the airline is struggling to turn a profit. Reader Robert asked if I could write an update post on how the airline is doing, so I thought that would be interesting to take a look at…

Breeze Airways’ financials aren’t pretty

In this post I wanted to take a look at what we know about Breeze Airways’ financials. Breeze isn’t publicly traded, so we don’t get detailed financials. However, even privately owned airlines have to submit a Form 41 Financial Schedule with the US Department of Transportation (DOT), which has all kinds of fascinating details.

The website enilria.com has a detailed look at just how bad Breeze’s financials are. Let’s just take a look at Breeze’s revenue and operating expenses for five consecutive quarters from Q1 2022 to Q1 2023:

• In Q1 2022, the airline had revenue of $17,194,380 and expenses of $38,221,230, for a loss of $21,026,850, and an operating margin of -122%
• In Q2 2022, the airline had revenue of $28,113,070 and expenses of $64,617,250, for a loss of $36,504,180, and an operating margin of -130%
• In Q3 2022, the airline had revenue of $34,470,200 and expenses of $72,366,360, for a loss of $37,896,160, and an operating margin of -110%
• In Q4 2022, the airline had revenue of $55,574,110 and expenses of $86,233,630, for a loss of $30,659,520, and an operating margin of -55%
• In Q1 2023, the airline had revenue of $67,378,610 and expenses of $115,400,500, for a loss of $48,021,890, and an operating margin of -71%

Admittedly it takes some time for an airline to establish itself, and it’s expected that an airline will lose money for some amount of time after launch. That’s one of the reasons the airline raised over $300 million in capital to launch operations. By my math, the airline had an operational loss of around $175 million over the course of five quarters, which is a lot. That means the carrier has burned through nearly two-third of its startup capital in those quarters alone.

Beyond that, the margins here are just beyond awful. Admittedly they decreased a bit over time (as a percentage) as the airline ramped up operations, but to lose over $48 million on just over $67 million of revenue is horrendous.

I haven’t yet seen the data on the carrier’s Q2 2023 results. I’d expect they’d be a bit better than in Q1 2023, though perhaps not amazing, as leisure travel demand has so overwhelmingly been for long haul travel.

Why has Breeze Airways been struggling so much?

As a passenger, I love the idea of Breeze Airways, as it’s an airline with a fairly impressive product, much better than you’ll find on other ultra low cost carriers. Before the airline launched, Neeleman claimed that the company could break even with a fairly low load factor, all while parking planes for several days per week, thanks to its amazing cost structure.

So, what went wrong, causing the airline to be losing massive amounts of money? After all, the airline is flying efficient planes. Keep in mind that the DOT publishes data about demand between city pairs, so when airlines like Breeze decide which point-to-point routes to operate, they use that data to make decisions.

How can Breeze get stuff so wrong? The way I view it, there are some major issues:

• For one, Breeze’s labor costs have been way higher than expected; at the time that Breeze prepared to launch, there was a pilot surplus rather than a pilot shortage, so pilot pay has increased considerably
• Breeze has been all over the place in terms of its network, and has added and canceled routes at a pace I’ve never seen before from any airline; while it’s good to be flexible, this has caused a lot of passengers to lose faith in the airline, after a route was canceled with no alternatives
• Breeze’s network is just too fragmented, to the point that few people can really be loyal to the airline, or fly with the airline repeatedly; it’s not like Sprit, which has a huge presence in markets like Baltimore, Fort Lauderdale, etc.
• While there’s clearly demand in the markets in which Breeze is flying, I think route planners underestimated how challenging it is to gain market share as an unknown player in a market; some people probably prefer to connect on an airline they know, vs. one they haven’t heard of
• I think Breeze has the same issue as some other airlines that don’t perform so well financially, where the carrier is trying to offer a slightly better product than the competition, but can’t get a revenue premium for it; for example, Breeze has first class-style seats, though it doesn’t seem like that’s going all that well

I don’t know how things are going to play out with Breeze. However, the carrier constantly launching and then canceling routes, combined with the airline now having racked up nearly $200 million in operational losses, isn’t a good sign.

It’s interesting that Breeze has increasingly been using some of its planes for sports charters. That’s unlikely to make the airline a ton of money, but it should at least help with minimizing losses, since it’s reliable revenue. At a minimum, it should buy the airline some time.

Unless something drastically changes soon (I guess we’ll see the Q2 2023 numbers), the airline will either need more capital, or will have to do something. The airline is expected to take delivery of an average of one new Airbus A220 every month, and I’m curious if that happens as planned…

Bottom line

While it’s anyone’s guess how things play out, Breeze Airways seems to be struggling. Between Q1 2022 and Q2 2023, the airline had an operational loss of roughly $175 million, on just over $200 million in revenue. It takes airlines time to become profitable, though these numbers look bleak to me…

What do you make of Breeze’s financials, and the carrier’s prospects of becoming profitable?