Breeze Airways Inches Closer To Profitability… Maybe?

Breeze Airways Inches Closer To Profitability… Maybe?

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

While the airline isn’t publicly traded, finances shared with the Department of Transportation (DOT) have suggested that the airline is hemorrhaging money. When you combine this with the general financial challenges that low cost carriers in the United States have been facing, many have assumed that Breeze’s days were numbered.

There’s now an interesting update when it comes to the carrier’s goal of becoming profitable…

Breeze reports first monthly operating profit

Back in February 2024, Neeleman revealed that he expects that Breeze will be profitable for the first time in 2024. While acknowledging that the path to profitability took longer than expected, Neeleman claimed that “we fully anticipate making a profit this year, and more and more in years to come.”

He went on to state that the airline “didn’t get as efficient as we could soon enough but we’re getting to that point now and we are really pleased with the business.”

There’s now another update — March 2024 is the first month where Breeze has reported an operating profit. The airline credits this success to strong unit revenue growth, spurred by high demand for premium leisure products, as well as network maturity in key markets.

The airline generated more revenue in March 2024 than in the entirety of the first quarter of 2023, though in fairness, the airline has also been growing at a fast pace. Even beyond the month of March, the airline claims that in the first quarter of 2024, unit revenues increased by more than 30% year-over-year.

In terms of operational performance, the airline also shares that in the first quarter of 2024, it had a 99.8% controllable flight completing factor, a controllable on-time performance of 74.5%, and one of the lowest mishandled bag rates in the industry, at 0.27 bags per 100 bags loaded.

Question — is 74.5% on-time performance something to brag about, especially when those are only the controllable delays (in other words, excluding things like weather)? Because that honestly sounds pretty bad to me…

Breeze hopes to be profitable in 2024

Breeze orders more Airbus A220s, streamlining fleet

Earlier this year, Breeze announced some major fleet updates, which the company hopes will help with the profitability goal. For one, the airline is growing its Airbus A220-300 fleet even further, as the company has converted 10 A220 options into firm orders. With this, Breeze’s firm A220 order book is now up to a total of 90 aircraft, which will eventually make the airline one of the largest A220 operators in the world.

Keep in mind that Breeze initially launched passenger flights in 2021 using Embraer E190 and E195 aircraft. This was always intended as a temporary measure — by the end of 2024, Breeze intends to exclusively use A220s for its regularly scheduled passenger flights.

The airline will instead use Embraer aircraft exclusively for charter service, as Breeze has a fairly robust sporting team charter business. That’s great news in terms of creating a consistent passenger experience.

Breeze is phasing out Embraer planes on scheduled flights

What should we make of Breeze’s finances?

Earlier this year when Neeleman suggested that Breeze would be profitable in 2024, many of us were shocked:

  • Per publicly available data, Breeze’s operating losses prior to this year have been massive; for example, in Q3 2023, the airline claims to have lost nearly $50 million on under $100 million in revenue, for a margin of negative 51%
  • Breeze’s behavior hasn’t exactly been that of an airline doing well, based on how frequently the airline has announced and then canceled routes a short time later, which you wouldn’t consistently expect if the airline has a successful model
  • Keep in mind that even established low cost carriers are struggling to make money at the moment, let alone an airline like Breeze, that’s still trying to figure itself out
Quarter
Revenue
Expenses
Profit (Loss)
Margin
Q1 2022
$17,194,380
$38,221,230
($21,026,850)
-122%
Q2 2022
$28,113,070
$64,617,250
($36,504,180)
-130%
Q3 2022
$34,470,200
$72,366,360
($37,896,160)
-110%
Q4 2022
$55,574,110
$86,233,630
($30,659,520)
-55%
Q1 2023
$67,378,610
$115,400,500
($48,021,890)
-71%
Q2 2023
$99,875,240
$127,879,820
($28,004,580)
-28%
Q3 2023
$97,112,000
$146,951,000
($49,839,000)
-51%
Breeze Airways Financial Q1 2022 through Q3 2023

Many of us are excited to see how the situation evolves this year, and if the airline actually becomes profitable. An operating profit in March is of course good news, though:

  • March is a very strong month for domestic travel demand, given spring break travel; being able to turn a monthly profit and an annual profit are very different things (just ask any transatlantic airline)
  • An operating profit is of course a good thing and a step in the right direction, but that’s not the same thing as a net profit

This also brings up one additional point. Several weeks ago, Cranky Flier had a fascinating guest post, looking at one unusual part of Breeze’s financials. Financial data shared with the DOT provides a breakdown of expenses, and expenses are put into a variety of categories.

These categories include things like salaries, aircraft fuel, maintenance, advertising, and more. One thing that stands out is Breeze has an “other” category of expenses, which in many quarters is the single biggest expense there is. Yes, bigger than salaries, and bigger than fuel. Meanwhile at virtually all other airlines, that “other” category has close to zero in expenses.

In 2022, that “other” category made up roughly 25% of expenses every quarter, while in 2023, that “other” category made up roughly 33% of expenses every quarter. The consistent percentage of expenses made up by that category each quarter sure makes you wonder what’s going on here.

Obviously this is a huge part of Breeze’s financials, yet we don’t actually know what that entails. And suffice it to say that details of that would tell us a big part of Breeze’s financial reality. It’s all very strange.

Will Breeze Airways really be profitable in 2024?

Bottom line

A couple of months ago, Breeze Airways CEO David Neeleman claimed that the airline will turn a profit in 2024. Now the airline is reporting how it has turned its first operating profit ever, in the month of March of 2024.

This represents good progress, and suggests the company isn’t in a horrible situation. At the same time, it’s not that hard for a domestic airline to turn an operating profit in March, when flights are full with spring break travelers. Furthermore, an operating profit and a net profit can be two very different things.

I’m fascinated to see how this situation evolves, as all the publicly available data prior to 2024 pointed to very grim prospects for Breeze.

Do you think Breeze Airways will be profitable in 2024?

Conversations (5)
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  1. Exit Row Seat Guest

    Wasn't there an analysis where Breeze had huge "miscellaneous" expenses based on their minimal financial reporting due private ownership. Speculation was gobs of money returned to preliminary investors with minimal cash retention on the part of Breeze.
    As usual, lots of hype upon initial public offering in the future. However, need to retro-align financials via GAAP guidelines prior to IPO.
    Disclosure is paramont prior to investment!!

  2. Scudder Diamond

    *Every* new business starts off operating at a loss. Measuring thier losses without an understanding of the funders expectations to inject capital is pointless.

  3. LEON JUSKALIAN Guest

    BREEZE IS A WINNER; EASE UP ON. THEM TO AVOID EMBARRASSMENT, SAVE YOUR REPUTATION. DAVE'S NO FOOL

  4. ConcordeBoy Diamond

    And this is them operating during an economic "recovery" period (used lightly)... imagine where there'll be once the cyclical "bust" period for travel hits.

    Only will take a fuel shock, regional financial downturn, or unfortunate security/terrorism event; and we tend to get those like clockwork on a per-decade basis.

    I dunno.....

  5. Jacob Guest

    I like to throw darts at a board too. But that doesn’t mean I am good at it. **shrugs**

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The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.

Exit Row Seat Guest

Wasn't there an analysis where Breeze had huge "miscellaneous" expenses based on their minimal financial reporting due private ownership. Speculation was gobs of money returned to preliminary investors with minimal cash retention on the part of Breeze. As usual, lots of hype upon initial public offering in the future. However, need to retro-align financials via GAAP guidelines prior to IPO. Disclosure is paramont prior to investment!!

0
Scudder Diamond

*Every* new business starts off operating at a loss. Measuring thier losses without an understanding of the funders expectations to inject capital is pointless.

0
LEON JUSKALIAN Guest

BREEZE IS A WINNER; EASE UP ON. THEM TO AVOID EMBARRASSMENT, SAVE YOUR REPUTATION. DAVE'S NO FOOL

0
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