When the Executive VP of a start-up airline begins a presentation by telling you they aren’t crazy, it’s probably not a good sign. But sure enough, Avatar Airlines EVP Michael Zapin began a recent media call by saying “First, we’re not crazy to start a new airline in the midst of a COVID pandemic.” I’m not sure anyone is calling them crazy for starting up an airline during the pandemic. People are calling them crazy for starting THIS airline.
Avatar is a long-running startup airline with efforts that date back nearly 30 years. The airline was called Family Airlines in a previous life, and it is indeed the current record-holder for most comments on a Cranky post with 319. So when I was invited to attend a media briefing, I just couldn’t resist.
Even better, there were only two of us on the call, so I was able to ask several questions about the company. I bring those to you here today. My questions were submitted via a chat window and they responded live. Both Michael Zapin and founder Barry Michaels were there to give their wisdom. So let’s get right into it.
Brett Snyder, Cranky Flier: What’s behind the Avatar name? Does it have important meaning to the company? What does it symbolize?
Barry Michaels: For years I fought changing the name of the airline; it was originally Family Airlines. Everybody wanted to change the airline and I was walking through Walmart one day shopping, and I got a phone call from our CFO at the time. He said… Avatar Airlines… and this was year after the movie came out. I thought for a moment and said “I like it.” There’s nothing in the name anymore; there’s no brand loyalty, nobody cares.
And that really does boil down the essence of this company. Nobody cares about anything except getting a cheap flight, and they are trying to create a deliverer of cheap flights. The idea has barely changed in 30 years. Avatar wants to run jam-packed 580-seat 747s domestically. This plus low fares equals profit in their world.
The presentation was full of fluffiness about the importance of people, how it’s all gonna be great, and how the airline will change the world… but if I wanted substance, I knew I’d have to get it through questioning and hope I’d get answers that made sense.
Cranky: There’s been an effort to start this airline up for something like 30 years now. Why is this different now?
Michael Zapin: To be perfectly candid, the short answer… I’m sure you’re aware it takes a good chunk of change. Money actually solves a lot of the issues this airline has had through the years. We probably could have launched a lot sooner…. Also, I want to say the team… there are a few legacy members of the team, but for the most part it is a different team now, there is a different energy.
Everyone that is working now is firing on all cylinders. It’s not like the company has been actively struggling for 30 years. There was a momentum and then there were lulls. When no-one is getting paid, there is an attrition, but for the last couple of years, that momentum has certainly picked up.
The difference today is that there has been a swelling of consumer outrage… the level of dissatisfaction in the domestic market has really reached a breaking point with people. We have an opportunity to distinguish ourselves… we can come out stronger than the other airlines because of what they’re faced with enormous expenses and not having the revenue.
Barry Michael, Founder: This airline was incorporated in 2004. There was a gap between that one and this one. We perfected it to the very utmost.
Ok, so in summary… we didn’t have money. We needed money. We still need money. I asked a follow-up.
Cranky: If the [current] airlines are going to be saddled with “enormous” expenses and low revenue, doesn’t that point to there being a need for less capacity, not more?
Michael Zapin: Yes, even if that’s true, when you look at the consuming public, we all know that price is king and most people gravitate to wherever they can get the cheapest ticket regardless of how miserable the flying experience is…. So if you’re 40 to 50 percent cheaper, even if demand is down and you’re competing against other airlines, we’re talking about filling up 1 flight a day. We don’t need to put everybody on to our planes. We’re confident we will fill up first.
Barry Michaels: Fuel costs the same for most airlines. If we have to raise the costs of the ticket, so do other airlines and we’ll still be 50 percent below the lowest cost ticket out there. People will always fly; there will always be a market. The same airlines are flying to the same city pairs with the same equipment and they’re competing on schedules, what not…. There’s no such thing as a low cost carrier.
It was striking to me how little about airline behavior seems to be understood by this team that’s been working on this for so many years. There is no way that the existing airlines are going to let Avatar get a massive price advantage like that. The ULCCs will sit on top of them, and the legacies might, depending upon how demand is looking. These days, fares are dirt cheap as it is. And the airlines can absolutely afford to sit on Avatar’s fare on a few routes if it makes them go away.
Then there’s the demand problem when you have 580 seats.
Cranky: You can make money on a Friday night to Vegas, but how do you do it on a Wednesday mid-day with 580 seats? In other words, how do you handle off peak?
Barry Michaels: I love this question, because to me when you fly to a certain market, that market, that city pair has 10,000 seat a day and we’re looking to fill up 500. It’s kind of a no-brainer if you’re 50 percent below the lowest fare out there. Today it’s a different market entirely. You go on the internet and you know who’s got the lowest fare out there.
The airline is not the type of airline that we could fly everywhere. We’re limited to certain markets and those markets are the big markets. To me it’s mostly about the price of the ticket. then the question is, can you make money at it?
Do you know how many airlines have started and failed that came in saying “we just need a tiny piece of the market and then we’ll be good.” It doesn’t happen that way. Existing airlines don’t let you come in and steal traffic like that.
But Avatar is planning on making money in other ways. There was a lot of talk about selling advertising on airplanes wherever possible, but they are leaving the biggest revenue generators like bag fees off the table. This is an all-in pricing model. Even the wifi will be free, but it’s going to be sponsored by someone else.
Oh, and the 747s with their massive bellies? Those will be gold mines as well. See, Avatar thinks it can just sell its belly space to a freight company like FedEx and they’ll pay a flat fee per flight and fill it as they see fit.
Cranky: Why would FedEx use your capacity when it has its own, especially on trunk routes?
Barry: It’s not only FedEx, it’s other freight carriers as well. It’s like an insurance policy. The ideal operation for us is we sign a deal where they own the bellies of the aircraft… but we have no doubt that whether FedEx or UPS or Joe’s freight, we’re gonna fill those bellies up…. There’s great demand for freight, especially now.
So there you have it. Now Avatar is pushing hard for investors, and it’s holding regular investor calls to get people on board. I will not be one of those investors, that’s for sure.
Good article Brent. There’s a strange allure that drives otherwise sane people to make insane investments in airlines.
The notion of flying obsolete 747s with their four engines and 580 people just seems beyond the realm of reason. Think about it. You’re flying planes that, for the most part, are 25+ years old. You have four engines to maintain plus all of the systems and support costs necessary for ultra large airliners. The logistics associated with the 747 at most airports are daunting, which is why we don’t see a lot of ULCCs flying them. At a minimum, I’d imagine they’d be better off heading for the used market and looking for 777-200s at the end of their fleet life for the major carriers.
As to the cargo angle, much depends on whether the airline becomes a cargo carrier that has people on the upper deck, or a people carrier that has cargo below. The timing for people and cargo doesn’t always work — and usually doesn’t. Amtrak found that out years ago with its Mail & Express operation. Eastern did too with the Midnight Special.
Is it April 1 already?
My question, too!
You beat me to that one. But this actually wouldn’t be believable enough to be a good April Fools prank.
I have to admit that, as I was reading this exchange, I had to check the calendar multiple times to make sure that it wasn’t April 1.
How did you keep a straight face during this interview?
Anthony – Well, the good news is that it was a webinar so I could only ask questions by writing them down. My webcam was not on!
Did these two appear drunk or otherwise impaired during the call?
Rereading the piece, I’m more convinced that Michael & Barry are both in need of heavy psycho therapy. These two are totally off the tarmac & need help.
I had to check the date to be sure it’s not April 1st.
You always know something is amiss when there are as many presenters as attendees.
I can’t believe they invited Cranky as one of them.
> Now Avatar is pushing hard for investors, and it’s holding regular investor calls to get people on board.
Looking forward to the American Greed episode covering Family/Vanguard.
A few quick thoughts…
1) I’d say that I doubt Brett will be invited back to any future media briefings, but to be honest I suspect Avatar was happy to get any press coverage.
2) Is Avatar Airlines going to sell a MLM scheme or religious cult to customers? Sounds like that those might fit their management team’s skills a bit better.
3) Brett deserves an Emmy for sitting through that call with a straight face without yelling at the screen or ruining his computer by laughing so hard coffee sprayed out of his mouth. I guess the “mute” button is a wonderful thing on calls like this.
4) US domestic air freight tends to move overnight, so that it can be shipped in the evening and arrive the next morning. However, people don’t like to fly redeyes, especially in a plan with very tight seats. Unless Avatar plans to sell its freight space for almost nothing (as US domestic air freight that takes > 1 day to arrive isn’t worth much), it will be lucky to get much of anything for the freight. (Remember that you can move an entire 53 foot truck of product, 42,000 lbs’ worth, between most points in the lower 48 states in 3 days or fewer, just by paying extra for a team of 2 drivers to keep it in near-constant motion, so domestic air freight that takes > 12 hours to get to the destination airport isn’t worth that much of a premium).
5) If you absolutely had a 747 burning a hole in your pocket, I’d suggest swapping it for a cargo plane, then leasing that on to do chartered cargo runs… Rates are still high enough now that you’d likely earn more doing that than from Avatar’s business model.
6) Would you trust these guys to properly maintain (or hire qualified others to properly maintain) a complex and very old plane? Would you even trust these guys to fix a leaky faucet?
With Sun Country’s highly successful IPO yesterday (the stock priced at $24 instead of the predicted $21-$22) coupled with Frontier’s pending Initial Public Offering, Avatar may see this as a real window to gain financing and finally gain some traction in the financial community. As others have noted, the business plan itself is decidedly tenuous, so I won’t go there. Despite that, if there ever was a time to search for capital, this is it.
As dumb as these guys are (this “airline startup” is not even to the level of a middle school, intro to business project) I CANT STOP CLICKING!!! I am addicted to the delusion. It is absolutely like watching a car crash, except it never happens.
As I said during Cranky’s invitation for 2021 predictions, I’m afraid the next year or so will see a rise in ill-advised startups. There are too many cheap, relatively young frames out there. Plenty of big egos that have figured out how to build a better mouse trap and lots of speculative capital sitting on the sidelines.
A twist to JFK’s famous comment, “a lowering tide sinks all boats”. The only thing these people would accomplish is wrecking an already fragile PRASM model.
Just to build off of this when Doug Parker remarked that AA would never lose money again I felt someone was just lining up to throw pie at his face. The airline industry is still full of people in senior positions who would gladly sacrifice profitability in the name of market share, especially if you are in SEA, cough cough.
When you don’t have the skill set to sell a time share, make up an airline investment opportunity!
There is some fodder below for additional commentary. I like 2b: This entity is potentially an avatar for the fleecing of investors. ;)
av·?a·?tar | \ ?a-v?-?tär \
Definition of avatar
1 : the incarnation of a Hindu deity (such as Vishnu)
2a : an incarnation in human form
b : an embodiment (as of a concept or philosophy) often in a person
“She was regarded as an avatar of charity and concern for the poor.”
3 : a variant phase or version of a continuing basic entity
the latest avatar of the conservative movement
4 : an electronic image that represents and may be manipulated by a computer user (as in a game)
Amazon could look at the belly of those planes and in the right market, would be happy to use that space if the price is low enough.
Like was said before, it will work sometimes in some markets on some days, but you never know until you try.
You should have saved this for April 1st. Anyone that would spend any amount of money on these clowns deserves to be ripped off.
Waaaaay back when in an airline management class at the University of Hawai’i, I learned an important industry adage:
Grifters never fly…
Reminds me of the old adage:
How do you make a million dollars? Take a billion dollars and start an airline.
Investors looking for a tax write-off may be interested…
I’ll have what they’re having!
Had to close my laptop upon reading about the Avatar movie. And this interview was the straw which finally broke the camels back and made me write some satire about these joke airlines: https://theairplanesblog.wordpress.com/2021/03/20/come-start-an-airline-its-easy/
Didn’t this Michaels grifter spend time in federal prison?
There is a Washington Post article about Barry Michaels being sued by investors, convicted, and sent to prison for 21 months back in the 1990s:
From the article (not behind the paywall):
“Barry Michaels’s first attempt to start a bargain airline ended with him being sued by investors, sanctioned by the Securities and Exchange Commission and ultimately receiving 21 months in federal prison on securities fraud and tax charges.”
That alone would give investors pause, and they seem pretty bold to proceed now given those past concerns.
Oh, and on Avatar’s website, in the “About” section, under “Why the 747” they still say:
“Our plan is to go public within 3–5 years of flight operations to raise capital to purchase 30 new 747/8 aircraft from the Boeing Company. ”
Boeing has already announced they are terminating production of the 747:
“Boeing said that these will be the last 747s ever built as the program comes to a close after a half-century.”
If Avatar is really serious, and not trying to fleece investors, maybe their website should be periodically updated to reflect reality.
The closest thing I can remember to this was World Airways. They had a redeye from JFK to LAX via BWI back in the 80s. It was an ancient DC-8. No food, no movie, almost no crew, but dirt cheap. I was young and broke. This was not necessarily a good deal, but it was the only deal I could afford and two of us needed to get to LA. It worked OK as long as competing fares were unaffordably high. In the current market, I’m pretty sure people will just fly American – or if they’re really budget-conscious, the low-fare option on Southwest. I also agree with those who point out that the maintenance cost on an elderly 747 will be, well, astronomical.
If you want to fly for Avatar, you are required to invest a minimum $75,000, but recommended $150,000. https://avatarairlines.com/our-flight-deck/?fbclid=IwAR2_q5hC-9HRwhZIkPAffrHhVrErasUhVXIj5x4mnJEJWiu1-dG8EB2yNyI
This site should be called the the fool flyer instead of the cranky flyer, it hasn’t gotten any smarter than it was years ago. Just another fools blog!
I’m just amused by how long this insane grift has been going on for. I was in seventh grade (!) when that original post when up in 2009. I cringe slightly when I read my comments now, but… I thought this was a hilariously bad idea as a twelve-year-old, and, well, my position hasn’t changed.
Thanks for bringing us the laugh, Brett.
I think that Avatar Airlines should purchase 40 used Boeing 747-400’s from airlines that still operate them and 40 new Boeing 747-8’s for a fleet expansion.