Avelo Airlines pulled $226K from Volusia taxpayer fund to subsidize operations

In its first three months in operation at the Daytona Beach International Airport, Avelo Airlines used over $226,000 from a Volusia County taxpayer fund set aside to ensure a minimum amount of revenue for the airline.

Avelo Airlines started offering twice-a-week nonstop flights in June to two routes: Daytona Beach-New Haven, Connecticut, and Daytona Beach-Wilmington, Delaware.

To entice Avelo Airlines to service the airport, the Volusia County Council, which has authority over the airport, approved a guaranteed revenue fund of $1 million. Avelo can dip into that fund over its first two years to cover operating costs if it doesn't meet minimum revenue goals from ticket sales.

The minimum revenue fund is part of the county's Economic Development fund and is used to promote business activity in the county. The airport is also waiving landing, terminal and ground-handling fees for Avelo's first two years, which it does for all new airlines.

Positive economic impact

Despite the expense, Cyrus Callum, Volusia County Aviation and Economic Resources director said the airline has had a positive economic impact on the county through increased visitor spending.

The fund reduction was brought up at a Dec. 5 Volusia County Council meeting and was not on the agenda.

At the meeting, Callum presented a revenue analysis of Avelo's operations which showed that with passenger facility charges included along with airport revenue, Avelo still brought in about $51,254 to the airport even though Avelo used the minimum revenue guarantee fund.

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Most of what Avelo used from the minimum revenue guarantee, over $191,000, was used to cover operating costs for the Daytona Beach-Wilmington route. The rest went to cover operating costs for the Daytona Beach-New Haven route.

Overall the airport saw a revenue gain in the first quarter of Avelo's operations, Callum said.

"When you take into account the airport revenue from concessions and also the airport passenger facility charges that we use toward our capital improvement programs, we had a net revenue to the airport of (over) $51,000," he said.

'Very successful' first three months

Callum called it a "very successful" first three months for an ultra-low-cost carrier being in the market. During the first quarter of operations, 12,606 passengers flew on both routes out of 13,818 possible passengers, he said.

Concessionaires at the airport, who provide things like food, drinks, gifts and rental cars, grossed about $951,897 more from July through October of this year vs. last year. Of that amount, about $243,973 went to the airport in net revenue.

Avelo Airlines is an ultra-low-cost carrier, so their flights are inexpensive. They've also been offering reduced fares in Daytona with introductory rates for both flights as low as $49. That has impacted revenue but is also part of a strategy to attract customers, Callum said.

Fares will go up to $134 starting in March.

Callum said passengers from Avelo are estimated to have spent over $2.4 million in the community through restaurants, shopping, hotel stays, and other services.

"So $2.4 million in the first three months of service with the $226,000 investment, that is the ROI (return on investment) on this service in my opinion," Callum said.

He also said Avelo's presence is helping boost attention for the airport and is in talks with additional airlines.

Some changes are ahead for the service.

Avelo recently announced that it will suspend Daytona Beach-Wilmington, Delaware flights from Jan. 6 through March 6 to conduct maintenance on planes for that route.

The suspension is necessary because the arrival of new aircraft has been delayed, an Avelo spokeswoman said in an email to the News-Journal in November. New Haven flights won't be affected. Avelo could bring back flights for the Daytona 500.

― Business Editor Clayton Park contributed to this report.

This article originally appeared on The Daytona Beach News-Journal: Avelo Airlines used $226K in tax funds for Daytona airport costs