Airlines can create demand for flights just by opening new routes that didn't exist before. (Note to my fellow avgeeks: the geography of this doodle is not meant to represent any specific airlines.)
A Breeze Airways Airbus A220 in Charleston, West Virginia.

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Sometimes, people have to fly, either for work or personal reasons. Other times, travelers don’t even know they want to take a trip until an airline offers them a new opportunity. In a cutthroat industry, new airlines are targeting underserved markets to generate demand for trips that may have previously been taken by another mode of transportation, or not taken at all.

“The vast majority of traffic that we fly is stimulated traffic,” David Neeleman, the CEO and founder of Breeze Airways, told me. “We’re basically generating demand where it didn’t exist before.”

When an airline starts a new route, a significant part of making it successful is attracting customers who want to keep coming back.

Often, that means drawing passengers away from other airlines who are already operating trips, but in many cases, new airline routes can initiate entirely new trip patterns that didn’t exist before.

This model, which relies on inducing new demand for flights, has become especially common among ultra-low-cost carriers, and Neeleman said it is a way for new airlines to grow without competing directly with well-established carriers who tend to be extremely protective of their existing customer bases.

“We’re really not a threat to the other airlines,” he said.

The Southwest Effect

Long before Breeze Airways was even a glimmer in Neeleman’s mind, the airline industry at large was reckoning with the idea of induced demand thanks to another one-time airline startup: Southwest.

In 1993, the Department of Transportation issued a landmark report on the effects of deregulation in the industry titled, “The Airline Deregulation Evolution Continues: The Southwest Effect,” which essentially laid out how new airlines with low operating costs and cheap ticket prices were helping spur demand for new flights as well as forcing established operators to get serious about making their existing flights more affordable.

“The principal driving force behind dramatic fundamental changes that have occurred and will occur in the U.S. airline industry over the next few years is the dramatic growth of low-cost Southwest Airlines,” the report said.

William J. McGee, senior fellow for aviation and travel at the American Economic Liberties Project, said that the report really highlighted how there was more than one way to drive demand in the airline industry.

“Until that time in the early '90s, there was a sort of conventional wisdom that airline traffic was just about stealing market share from each other, but that generating new traffic was a much more difficult thing,” he told me. “The smaller airlines, the low-fare airlines, they have the ability to come into markets and create new routes.”

Meanwhile, as Southwest becomes more like other airlines through its corporate overhaul, McGee said that new upstarts in the industry like Breeze are taking the model it pioneered into the next chapter of American aviation.

“I would argue that Southwest itself doesn’t have quite the same Southwest effect that it once did,” McGee said.

How travelers benefit from induced demand

For travelers in markets where new airlines enter, there’s an early honeymoon period during which the carrier attempts to drum up business with promotions and low fares. But the benefits go beyond bargain ticket prices once the airline is established.

According to Neeleman, Breeze operates in 84 markets that have no nonstop competition, which he said is a big plus for travelers who have the flexibility to fly on the days and at the times that Breeze serves those airports.

In many smaller markets, large airlines partner with regional carriers to feed passengers to their hubs. Breeze’s model is different because it primarily focuses on point-to-point service, rather than sending passengers to its operational bases.

“If Breeze didn’t exist, those 84 markets would not have nonstop service today,” he said. “It’s much easier if it’s taking you an hour and a half to get somewhere versus four hours (with a connection).”

McGee agreed that new airlines can be effective at drumming up business early on, but he said that for those carriers to truly establish a foothold in a market, they must back up their low fares with reliable service that keeps people coming back.

“For (Avelo and Breeze) that started in 2021, their honeymoon is over. Now it’s like, are you going to start to compete or not?” McGee said. “They have to compete on service and the product itself.”

Neeleman said that Breeze has consistently had good feedback from its customers and many repeat passengers in most of the markets it serves.

On the 100 routes it’s served for at least two years, Neeleman estimates that traffic is comprised of about 75% repeat customers.

How airlines identify and keep up new demand

As I wrote a few weeks ago, there are many ways that an airline identifies which routes make sense, but as companies try to induce new demand rather than capture existing travelers, the calculations can be a little different.

Neeleman said it comes down to identifying markets where the airline can grow, figuring out why people in those places want to travel, whether for business or leisure or some combination of the two, and where they want to go.

“If you live in a place like Providence, Hartford, Norfolk, or Charleston, we want to be the number one airline in terms of destinations,” he said. “We want to be that airline that can get you to the most amount of places and can get you there in many cases twice as fast for half the price.”

Beyond that, Neeleman said, it’s about making sure customers want to come back, and McGee agreed.

“Over time the low-fare airlines have recognized that the low fares by themselves are not enough,” McGee said. “You have to back that up and the product has to be reliable.”

Zach Wichter is a travel reporter and writes the Cruising Altitude column for USA TODAY. He is based in New York and you can reach him at zwichter@usatoday.com.

This article originally appeared on USA TODAY: Why new airlines want you to fly places you never thought you would

Reporting by Zach Wichter, USA TODAY / USA TODAY

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