How to Start an Airline
Wendover Productions・15 minutes read
The airline industry is facing challenges due to COVID-19, prompting the need for reinvention to address new consumer demands. Start-up airlines like FlyPop, Play Airlines, and Breeze Airways are developing unique business models to avoid direct competition with major carriers and navigate the complexities of airline entrepreneurship.
Insights
- Crisis situations like the COVID-19 pandemic create opportunities for new airlines to enter the market by offering unique business models that avoid direct competition with established carriers, leveling the playing field for startups.
- Start-up airlines face significant challenges in securing funding, obtaining necessary certifications, and acquiring aircraft, but strategic practices like leasing and innovative approaches to partnerships can help navigate the complexities of the airline industry and enhance their chances of success.
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Recent questions
Why is starting an airline considered challenging?
Due to complexity and capital intensity.
How do start-up airlines secure funding?
Facing low profit margins and investor disinterest.
What is the significance of obtaining an air operator's certificate?
Required for commercial airline operations.
Why do start-up airlines often lease aircraft?
To spread out costs and avoid large upfront investments.
How has the impact of COVID-19 affected aircraft leasing for new airlines?
Surplus of aircraft, lower prices, and opportunities for acquisition.
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Summary
00:00
Challenges and Strategies in Starting Airlines
- Normal times in business are compared to a road where competitors follow a similar path, while abnormal times, like a crisis, force competitors to choose different paths, leveling the playing field.
- The airline industry is currently facing a crisis due to the Coronavirus pandemic, leading to a need for reinvention to cater to new consumer needs.
- Starting an airline is extremely challenging due to its complexity and capital intensity, making it one of the toughest business endeavors.
- New airlines must have a unique business model to succeed, offering something better than competitors to attract customers.
- Major full-service network carriers dominate the airline industry, making it nearly impossible for new airlines to compete directly with them.
- Successful start-up airlines planned for 2021, like FlyPop, Play Airlines, and Breeze Airways, have unique business models that avoid direct competition with major carriers.
- Securing funding is a significant challenge for start-up airlines due to the airline industry's low profit margins and lack of investor interest.
- Start-up airlines need to obtain an air operator's certificate from national aviation authorities to operate commercially, with part 135 and part 121 certificates being the main options in the US.
- Acquiring airplanes through leasing is a common practice for start-up airlines, allowing them to spread out costs without the need for large upfront investments.
- Certification is a major hurdle for new airlines worldwide, as each country's air regulator must approve the startup's fitness to fly before granting them permission to operate.
14:13
Airlines benefit from strategic aircraft leasing opportunities.
- Leasing aircraft is a strategic move for airlines, reducing risk by allowing for shorter lease terms and the option to return aircraft before the end of the lease if necessary. This also enables airlines to acquire aircraft faster, especially beneficial for startups needing aircraft promptly.
- The impact of COVID-19 has made leasing aircraft more accessible, with existing airlines downsizing their fleets and retiring older, less fuel-efficient aircraft. This has led to a surplus of aircraft in the marketplace, pushing prices down and creating opportunities for new airlines like Breeze to acquire aircraft.
- Airlines like Breeze are utilizing innovative strategies like selling a portion of their aircraft order to another company, which then leases the aircraft back to them. This approach allows airlines to acquire the desired aircraft while benefiting from the advantages of a lease, showcasing the complexities and challenges of airline entrepreneurship.
