Episode Overview

In this episode of Bloomberg Talks, Breeze Airways CEO David Neeleman joins the host to discuss a landmark achievement: Breeze's recent certification by the FAA as a US Flag carrier, making it the first new US airline in over a decade to gain this designation. This allows Breeze to begin international flights, providing significant opportunities for expansion. The conversation explores Breeze's disruptive business model, Neeleman's philosophy on airline innovation, current industry challenges, and the broader outlook for airline profitability.

Key Discussion Points & Insights

1. Breeze Airways' FAA Flag Carrier Certification and Expansion

(00:22–01:48)

• Breeze becomes the first new US Flag carrier in over ten years, now cleared to fly internationally.
• Already operating over 50 airplanes, with a firm order for 90 Airbus A220s, option to expand to 120.
• About 87% of Breeze's routes have no nonstop competition; this niche allows growth without direct rivalry.
• International destinations will initially focus on leisure hotspots: Cancun, Punta Cana, Montego Bay.
• International flights will help optimize fleet efficiency, especially during slow travel days (e.g., Saturdays).

David Neeleman [01:28]:
"We have on firm order about 90 Airbus A220s with an option to go to 120... Saturdays are a little bit of a down day for air travel, but being able to take those airplanes and fly to Cancun and to Punta Cana and to Montego Bay, Jamaica is going to be a real great asset for us."

2. Disruption and Unique Positioning in the Airline Industry

(01:48–03:35)

• Neeleman's philosophy: new airlines must have a clear purpose and solve real market needs.
• Breeze targets secondary US cities underserved by major airlines, bypassing hub-and-spoke systems to offer nonstop flights.
• Focus is not only on low cost ("basic economy") but also providing choice, including first class and extra legroom seats.
• Breeze consistently ranks highly in customer satisfaction (NPS), and has received accolades from Travel + Leisure and APEX.

David Neeleman [02:21]:
"Never start an airline just for the heck of it. You have to start it with a reason. When I looked at the US market, 125 cities had lost more than 25% of their air service over the last 10 years..."

David Neeleman [03:17]:
"When we started, I said let's get you there twice as fast for half the price. That's our goal. And do it with options to fly first class or extra legroom or have free Wi-Fi and a lot of things you don't see on a US airline."

3. Operational Challenges and Solutions

(03:35–05:07)

• The pilot shortage is no longer a concern for Breeze; ample qualified applicants.
• Staffing at airports (especially third-party staff) is a current focus area, with initiatives for safety and efficiency.
• Introducing cameras at gates to monitor turnaround and ground operations.
• Stellar on-time performance: nearly 90% on time, with zero cancellations all summer.
• Neeleman stresses flawless operations as key to building customer loyalty and market growth in secondary city pairs.

David Neeleman [04:36]:
"Our on-time percentage has just gone through the roof. I think last month we were almost 90% on time. We didn't cancel a single flight all summer long because we just wanted to get our guests where they're going."

4. Market Segmentation: The "Haves" and "Have Nots"

(05:07–06:19)

• The industry is bifurcated: low-cost carriers serve the lower-income market, while legacy carriers focus on premium/luxury customers.
• Even ultra-low-cost carriers (Spirit, Frontier) are introducing first class options due to shifting customer expectations.
• The need for choice and segmentation: not all passengers value the same things (e.g., free bags vs. lower fares vs. comfort).
• Breeze positions itself across this spectrum with flexible bundles and accessible premium options.

David Neeleman [05:43]:
"I think people want choice. Southwest Airlines had one product for everybody, free bags, and now they're starting to differentiate. People want to say great for the free bags, but I don't care about free bags. I just want a lower fare..."

5. Airline Profitability and Investment

(06:19–07:42)

• Airline stock investment is likened to options trading due to volatility and cyclicality.
• High margins are possible in niche markets without nonstop competition.
• Breeze avoids overlapping with the big three (Delta, United, American) to maintain its unique market.
• Significant growth potential: Neeleman identifies about 400 potential markets for Breeze, currently serving only a fraction.

David Neeleman [06:48]:
"Trading some airline stocks is a little bit like trading options... We have some of the highest margins in the industry on routes where we have no nonstop competition."

David Neeleman [07:22]:
"We think there's enough market for about 400 airplanes and we only have 50. So it's a tremendous growth opportunity if you can get it right."

Notable Quotes & Memorable Moments

• On starting airlines for a reason:
  "Never start an airline just for the heck of it. You have to start it with, with a reason." — David Neeleman [02:14]
• On operational excellence:
  "If we [have a] flawless operation, then people will come back and fly us more often. And that's what we're seeing." — David Neeleman [04:53]
• On market opportunity:
  "We see there's about 15 people a day that travel between two cities, we believe we can turn that to about 100 a day." — David Neeleman [05:05]
• On the future of Breeze:
  "It's just finding those markets..." — David Neeleman [07:09]

Important Timestamps

| Timestamp | Segment | |-----------|----------------------------------------------| | 00:22 | FAA certification and vision for expansion | | 01:48 | Breeze's unique market disruption | | 03:35 | Current operational challenges and focus | | 05:07 | Industry segmentation: luxury vs. low-cost | | 06:19 | Airline economics and investment potential | | 07:42 | Closing remarks and future outlook |

Conclusion

David Neeleman details how Breeze Airways continues his legacy of disrupting airline norms—by targeting underserved city pairs, offering both value and premium options, and relentlessly focusing on operational excellence. Breeze's recent flag carrier certification will allow it to reach international destinations, increasing aircraft utilization and providing further market differentiation. Despite industry headwinds, Neeleman remains optimistic about growth prospects and profitability, as long as Breeze stays true to its mission of efficiency, flexibility, and customer experience.