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Breeze Airways CEO weighs in on inflation’s impact on airfare and rising cost of travel

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Breeze Airways CEO David Neeleman sits down with Yahoo Finance Live to examine the state of the airline industry amid staffing shortages and rising oil prices, inflation, summer bookings, and travel costs.

Video Transcript

RACHELLE AKUFFO: Well, consumers may start to think twice about shelling out for sky high airline tickets. We saw bookings slip in May, with airfares up 30% from before the pandemic, according to research from Adobe. Well, for a look at the path ahead, we're joined by David Neeleman, Breeze Airways CEO. Thank you for joining us, David.

So as we're seeing, the demand clearly still there, though, $37 billion spent so far this year on domestic flights, double what people spent in the first five months of last year. But then, of course, you have the inflation factor. What are you seeing? And what's your plan beyond the summer travel season?

DAVID NEELEMAN: Well, fares for the summer are high, you know. And there's no denying that. Anyone who goes in search for a flight, they can see that. But as we head to the fall, I think there's a lot of fare sales going on. Fares are much lower in the fall. And so-- and this is in the face of really high fuel prices. So we'll see how it develops. But, you know, I think people are paying more for gas. They're paying more for groceries. They're paying more for everything. So they're not going to continue to pay more for everything.

And so we've got to be more efficient. And in our business, it's interesting. If you said, would you prefer $60 a barrel oil in a recession or no recession and 120, it's, you could argue both sides of it. So we'll just-- being the lowest cost operator and doing what we do, finding desirable destinations is kind of just our plan to stay with what we're doing.

SEANA SMITH: Well, David, with prices significantly higher than they were a year ago, I would think that this might be good news-- not necessarily good news, but maybe your airline wouldn't necessarily feel the impact that maybe some of the other major carriers would feel, just because you are that low cost carrier. Do you think it's helping generate more interest in Breeze?

DAVID NEELEMAN: I think so. I mean, people want to travel. They're tired of being pent up. They want to go. There's obviously a ton of pent-up demand. But as the pocketbook gets a little tighter and inflation is a little higher, they're going to search a little longer to find lower fares. And so we're just more efficient and we can offer those lower fares.

We don't connect people through hubs, so that saves us a lot of money. We're very technological with our app and everything that we do. And so we can have lower costs. Our planes are really fuel efficient. And so hopefully we have those lower fares. And most importantly, we're the only non-stop in 95% of all of our markets.

DAVE BRIGGS: David, you're one of eight new low cost airlines that have come online since 2020. Why do you think so many have entered this market? And when people hear low cost airline, they think, oh, boy. What am I missing out on? How does the experience differ on Breeze Airways?

DAVID NEELEMAN: Well, on Breeze, you know, it's, we have two types of aircraft. We have the [INAUDIBLE], two and two seating, no middle seat, great experience. On our brand new 220s, we have 36 first class seats on those airplanes.

I just flew transcon from Richmond to San Francisco last week. And people were loving the service. And they're all aboard these brand new airplanes. So, you know, it's different. And we've got to charge a little more for those first class seats, but not two times more or three times more, like 50% more. And it's kind of affordable luxury. And we're trying it out, and people are loving it.

RACHELLE AKUFFO: And we've seen a lot of businesses really come to the forefront or start up during pandemics or during recessions. What made you decide to launch and go ahead with this, as well as investing in this new fleet of these Airbus A220 aircrafts as well?

DAVID NEELEMAN: Temporary insanity? No, we started this before COVID. And we saw some trends. We saw some trends that there were a lot of cities that were growing, cities like Huntsville, Alabama, Charleston, South Carolina. Pretty much to go to there, go to those cities, you had to connect through a hub. Or leave from those cities, you had to connect through a hub.

So we're starting a new service, Huntsville, Las Vegas. Never been on a Huntsville, Las Vegas flight. And it's a booming economy in Huntsville, Alabama. And they can hop on a plane and be in Vegas in a few hours. And that's just much better than connecting through Denver or Dallas Fort Worth or anywhere else. And it just stimulates traffic, saves costs. We can offer lower fares. And it just allows people to get away.

SEANA SMITH: David, I've got to ask you about JetBlue because you were a founder of JetBlue. You mentioned the fact that this is the fifth airline that you've founded. So you have a lot of experience in this space. Taking a look at JetBlue, they made this offer for Spirit. It's a competing offer out there from Frontier. When you see the consolidation in the space and Jetblue's appetite here for Spirit, what are your thoughts on that?

DAVID NEELEMAN: It's interesting. You know, I mean, obviously, it's a lot for them to take on this debt during this time. Things are kind of uncertainty with fuel prices up. But I think from their perspective, they just feel like they just need to be relevant. And they need to be bigger to be relevant. And so they feel like that the Spirit customers could use a little JetBlue experience.

But if that raises the cost a little bit, will the Spirit folks pay for it? So it's a very interesting dynamic. And, you know, I'm on the sidelines now. As the founder of the company, I'm obviously very interested to see what happens. But those folks are all running the company now. So I wish them the best.

SEANA SMITH: And Dave, real quick before we let you go, the pilot shortage. Obviously, a number of airlines have been dealing with the pilot shortage, really struggling to get the labor that they need. Is this something that you've been facing? And how are you dealing with this challenge?

DAVID NEELEMAN: We have plenty of pilots. That's not the problem. We have 175 pilots as of yesterday. We welcomed 18 more pilots. It's just the whole training pipeline is challenging. We've got a sim center here in Salt Lake. And we have simulators that we use in Dallas and Montreal. But the whole process of training and getting people through training, there are some attrition. Some of our pilots are leaving, going to other airlines.

But a lot of them are really thrilled to be here. So, you know, it's just-- it takes three or four months to get a pilot on once you hire. And then they have to go through training and then initial operating experience on the aircraft. So it's just-- when you're growing as fast as we are, that's really the challenge, is just the training pipeline.