Avelo Airlines raises more funding for US growth

Budget US carrier Avelo Airlines said it has raised its largest funding round since the company began operations in 2021, securing new capital from an undisclosed investor to bolster the carrier’s expansion plans and strengthen its balance sheet. The airline did not disclose the size of the investment, but called the new funding round “significant.” 

The cash infusion will support growth in Avelo’s scheduled passenger service across the United States and the Caribbean. It also strengthens the Houston-based carrier’s finances as it retools a fledgling network that serves both smaller and larger cities.

“This new capital strengthens our liquidity position and positions us to continue delivering reliable, affordable travel options to millions of customers who are underserved by other carriers,” Avelo founder and CEO Andrew Levy said in a statement. “This investment comes at a pivotal time in the domestic airline industry and will allow Avelo to double down on an addressable market that is too often being priced out by higher fare airlines.” 

The announcement follows what Avelo described as a stretch of improving financial results. The airline reported that July marked its fourth profitable month out of the last five, following approximately break-even results for full-year 2024. Avelo said its margins and cash holdings have been improving in recent months as some of its newer markets have matured. It also plans to roll out a loyalty program and co-branded credit card later this year in an effort to broaden revenue beyond ticket sales. 

At the same time, Avelo has trimmed its network. In August it pulled out of the Las Vegas market, ending flights from Redmond, Oregon, and Sonoma, California. The airline has also drawn criticism for operating deportation flights on behalf of the U.S. Department of Homeland Security, sparking protests in several states.Avelo’s growth plans come as other low-cost competitors, including Allegiant and Breeze Airways, continue to expand in smaller US markets, highlighting how difficult it can be for newer entrants in the current market environment to hold onto routes in a crowded segment of the industry.

Founded in April 2021, Avelo currently operates a fleet of 22 Boeing 737-700/800 Next Generation aircraft. The airline has carried nearly eight million passengers on more than 62,000 flights since its debut. Avelo’s route map includes 47 destinations across 18 U.S. states and Puerto Rico, along with three international markets: Jamaica, Mexico, and the Dominican Republic. Its business model has emphasized connecting smaller or secondary airports with direct flights, a strategy aimed at avoiding competition at crowded hubs while tapping into underserved demand. 

Despite recent improvements, Avelo still faces challenges common to startup airlines. The ultra-low-cost sector is marked by intense competition, thin margins, and sensitivity to changes in fuel prices, demand swings, or labor costs. The airline did not reveal details of its new investor, the terms of the funding round, or how much capital was raised. Without those specifics, it is difficult to assess the scale of the backing relative to the company’s growth plans. Some other U.S. carriers emerging from the COVID-19 downturn have sought hundreds of millions of dollars in fresh capital to sustain or expand their operations. 

But raising the largest funding round since its launch suggests Avelo has attracted meaningful investor confidence at a time when the U.S. airline market is shifting. The fresh capital gives the airline additional resources to pursue its strategy of connecting smaller markets with low-fare service. Whether it can sustain profitability as it scales will likely be Avelo’s next key test. 

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