In this post I’m going to talk about starting and running an airline. For some with a keen interest in aviation starting and running their own airline would be the fulfillment of a long held dream.
If you’re obsessed with aeroplanes what could be better than running a business that involves flying passengers and freight. The satisfaction of seeing your fleet (even if it’s just one aircraft) and knowing your company is making a profit must be immense, but as we’ll see starting an airline is far from easy, and running an airline, making a profit, and maintaining momentum over several years is harder still. Obviously, in a short post like this it won’t be possible to cover all the aspects in detail but we can take a very high level view of this idea.
A Brief Look At Airlines
The word airline conjures up images of fleets of aircraft that cost tens of millions each to buy and operate and which fly intercontinental routes. However, some airlines consist of one or two small aircraft flying in-country with a small team of pilots and administration staff running the show.
For example, the Austrian based People’s Viennaline once had a fleet of just two aircraft. One of its routes used to be one of the world’s shortest, with a flight lasting just eight minutes. They flew passengers from St. Gallen-Altenrhein Airport, Switzerland to Friedrichshafen Airport, Germany, thus saving them from a 77 km road trip around Lake Constance. However, the route has since been withdrawn and the airline has rebranded itself as simply ‘People’s’. This is an example of how airlines have to quickly adapt to changes in demand if they are to prosper.
Airlines are launched for a variety of reasons; someone spots a gap in the market, an obvious need, or just has a new idea. If you’ve read Sir Richard Branson’s autobiography you may be aware that Virgin Atlantic Airlines exists today due to an idea he had in 1984. Branson was in Puerto Rico airport about to fly to the British Virgin Islands when the flight was cancelled, so he hired an aircraft and wrote “Virgin Airlines” on a blackboard, then invited other delayed passengers to pay $39 for a seat to BVI.
It wasn’t long before he had sold every seat and the idea for Virgin Atlantic Airlines was born, but this one rare example of a good idea developed by someone who had the capital and drive to see it through.
Market Analysis & Research
There is little point in starting any business without first doing the market research. To do so is a gamble with the odds stacked against you. Comprehensive market analysis will reveal areas that it might be possible to exploit – put simply, a gap in the market. Your market analysis should reveal the anticipated growth in passengers and freight in any given region. From this you can determine what type of aircraft would be most suitable to meet the expected demand.
For example, most of the routes from one capital city to another are full and competition is fierce. However, there may be opportunities from regional airports feeding the major airports, or routes from one regional airport to another.
Regions and Environments
Having worked out where there is likely to be demand your next task is to research the regulations, standards, and procedures for any airline in that region. Remember that these regulations will apply whether you fly one aircraft or one hundred. The aviation industry is highly regulated so being aware of all those that can affect you is essential.
As well as local and regional regulations you’ll also need to know your own rights, particularly those pertaining to the nine Freedoms of the Air. These were formulated and agreed at the Chicago Convention in 1944.
The Business Plan
Now you’ve identified a demand that needs to be fulfilled and you’re familiar with the operating regulations in the country in question.
Next comes your business plan. This is another vital task that will take a considerable amount of time and effort to complete. However, it’s essential not only so that you have a plan to implement but so that you have a realistic plan that you can share with potential investors.
You may have seen the BBC TV program called Dragon’s Den in which entrepreneurs pitch their ideas to a panel of business gurus with the hope that they will be persuaded to invest in the business and mentor the business owners. These attempts frequently fail because the business owners have not done their homework and cannot recall key figures from the business plan.
Your airline’s business plan should cover everything; from the identified opportunities to brand development, from risks and obstacles to operational procedures. It should conclude with an investment figure i.e. how much money you’ll need to get this airline off the ground (pun intended).
Sourcing Your Aircraft
With your business plan complete and the capital in the bank it’s time to start implementing the plan. The first task is to acquire your aircraft. This is the bit you’ve been looking forward to! There are several options for financing the aircraft and which you choose will depend largely on your business plan and capital.
Most new airlines lease their aircraft since there is a glut, with many in storage. Companies that own these aircraft have to pay for the storage and insurance so they are keen to lease them to operators. There are several types of lease, wetlease, operational, or financial. If you have enough investment you can buy your aircraft outright.
In order to operate as a airline you’ll need the appropriate licence from the aviation authority in the country in which you intend to operate. For example, in the UK you’ll need to obtain an Air Operators Certificate from the CAA.
This process may take several months and you cannot operate legally without it. So it’s a process that needs to be built into your project plan. You’ll also need a 3 letter code from the ICAO which will be used to identify your aircraft to air traffic controllers.
Getting Up & Running
So now your aircraft are on the apron, you have recruited pilots to fly them, and all the other staff required to run your business. You have routes to fly and either passengers or cargo to carry. For the first few months you’ll eat into your capital as you pay all your overheads and running costs, including salaries for pilots and all other staff.
Your business plan should have given you some idea of how much money you’ll need to reach each milestone, but no matter how good your forecasts, in aviation the chances are that you’ll need more and more.
Aircraft don’t earn any money if they’re on the ground. However, now that you’re operating you can start invoicing for freight or you’ll start earning from carrying passengers.
Your next task is to keep your aircraft flying with full cargo holds or occupied seats. If it works then you can start considering expansion but don’t move too fast. Your investors will be expecting a return on their investment and it would be a shame to ruin your business’s prospects by expanding too rapidly. You’ll still have a lot of running costs including maintenance and spares for aircraft, salaries, fees, taxes, and so on.
Final thoughts about starting an airline
Given the difficulties in starting an airline it’s surprising just how many are launched each year. In 2017 for example, 79 new airlines were launched globally but 25 went out of business. Aviation is a constantly evolving industry and there will be more gaps in the market to exploit by those watching and ready to move into action when they appear.
A new small airline based in the UK is Firnas Airways. The idea and development of this airline was the subject of a Channel 4 documentary in 2018. It operates a charter service based at Oxford (Kidlington) Airport using a BAE Jetstream 31, which has 19 seats.