Budget airlines offering low-budget flights are driving Americans to travel again. Two new airlines raised more than $100 million in funding in less than a year. This is enough to cover the startup cost. Their goal is to capture customers who are looking to get the best value for their money.
According to Frontier Group Holdings Inc CEO Barry Biffle, “low-cost, leisure-focused, domestic-oriented air travel has been in vogue like it’s never been in vogue before”.
It seems that the current situation is perfect for those who are looking to entire the airline industry. It is the same strategy that worked for both Allegiant Travel Co. and Spirit Airlines Inc in the past.
Investors are optimistic about these airlines offering low-budget flights. Shares of Sun Country Airlines Holdings Inc are now up by 69% since March 17. Avelo Airlines, on the other hand, was able to raise $125 million.
Avelo CEO Andrew Levy said that “low-cost carriers are proven across the world to be better businesses”. Levy is experienced when it comes to budget airlines as he was the co-founder of Allegiant.
It seems that business travel isn’t going to pick up any time soon. However, leisure travel is a different story. More people are now looking forward to traveling this summer. US security checkpoints even recorded consecutive weeks of more than one million travelers since March 11.
People went on their spring break even if CDC initially discouraged people from traveling. And now, CDC announced that those who completed their COVID vaccine dose can travel with low risk.
For Peter Morries who is the chief economist at Ascend, which is a consultancy arm of Cirium, the window of opportunity is just open for a few years. He pointed that historically, there are companies that maximized recovery in the aviation industry. JetBlue Airways went public a year after 9/11 while Spirit’s IPO was in 2011, a year after higher fuel prices.
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