It has actually happened. Avelo made money. Well, at least, it made a pre-tax profit in the fourth quarter of 2023. We don’t have the DOT data yet for Q4, but Avelo pushed out a news release to announce the big milestone for the airline. With the breadcrumbs the airline provided, we can calculate a full picture of how the airline did it.
Here’s what we know. In 2023, Avelo says it generated $265 million in revenue. From DOT data, we know that the airline had $185.8 million in the first three quarters. That means in Q4 pulled in somewhere around $80 million.
From there, we can start looking at year-over-year comparisons to fill in the Q4 blanks. Unfortunately, that’s harder to do than it should be.
In 2022, Avelo was small enough that it only had to file half-yearly results, so we can’t get down to the quarterly level. If we take the DOT Q3 numbers and add that to our estimated Q4 revenue, we get around $142 million in revenue for the second half of 2023, give or take. In the second half of 2022, it had just shy of $100 million in revenue so revenues climbed 42 percent. This came on an scheduled seat increase of 65 percent.
The cost side of the equation is where things get more confusing, because we don’t have any real guidance on that, but we do have enough information to build a model. Here’s what it spit out.
Avelo Financial Metrics by Half Year
How did I get here?
Avelo did tell us in its release that full year 2023 pre-tax margin was 15 points better than 2022. In 2022, the airline’s operating margin as filed was -22.2 percent. A 15 point increase would bring us to a -7.2 percent margin for the whole year.
Now it’s just math. (Thank you, Excel, for one of my favorite tools ever built… Goal Seek.)
We already know roughly what revenue was from the previous math, and we know the full year operating margin. That means we can just tweak the Q4 expenses — our only unknown number — to get to a -7.2 percent margin on the year. This won’t be exact, because I assume Avelo is rounding to whole numbers in its press release, but it’s going to be pretty close.
In this model, Q4 cost would come in around $77 million, creating a positive 3 percent margin for the quarter. That would mean that vs Q3, revenues soared by 25 percent while costs went up only 5 percent on a 2 percent increase in seats.
Think about that. Q3 includes the busy months of July and the first half of August. Q4 has the Thanksgiving and winter holidays, but that’s really the extent of it. That kind of revenue increase is pretty solid work. I wonder if it’s more in fare or ancillary.
Can we go any deeper? Without DOT data for Q4, we can’t go that deep, but we can pull some information for at least part of the quarter. First, we can look at T-100 data which is now out through Nov 2023. This doesn’t have fare data, but it does have passenger and load factor information.
In Oct/Nov 2023, load factor was 76.9 percent, down from 82.1 percent in Q3. Even if December came in with solid loads that brought the full quarter total up a few points, revenue growth had to be really impressive. Barring insanely strong loads in December — which is unlikely since the first half of the month is pretty quiet — this means that it’s the revenue growth that really shined.
Now let’s break load factor out by base. (I included Santa Rosa even though it wasn’t a base during these times, but it will be soon.)
Avelo Load Factor By Base
As always, New Haven is the star. It continues to be the engine driving this airline, not only having the highest loads but also being worth more than a third of the seats for the entire airline.
I should note that Burbank appears to be doing much better for itself these days as well. That is not a bad result, especially for that time of year. Santa Rosa is also trending in a good direction.
Everything else is, well, it’s not great. Las Vegas is the lowest at all, and those numbers are not good, especially for a ULCC that makes its money by getting butts in seats, so they can buy other stuff. But Raleigh/Durham had the biggest decline vs last year’s October/November schedule.
Again, we don’t know fare data yet, but it does look like Avelo made good progress with fares in the quarter in general. Based on loads, it would seem that Burbank may actually have turned a corner in 2023 while New Haven continues to hum. The rest of the east coast looks like it needs some work. Then again, I imagine a fair number of those Orlando markets from small town USA are getting good subsidy behind them, so it’s hard to know.
Regardless of these specifics, it does look like Q4 was a very promising quarter for Avelo indeed. Congratulations are due to the team over there.
