Want to start an airline?
Thread Starter
Join Date: Jun 2001
Location: southern england
Posts: 1,650
Likes: 0
Received 0 Likes
on
0 Posts
Want to start an airline?
From the Guardian(31/7):
"Forget broadband telecoms, boutique investment banks and branded restaurant chains. The trendiest business opportunity of the moment is spartan, ascetic and charges customers pounds 3.95 for a sandwich. A budget airline is this year's surefire way to make a million.
Swept along in the tailwind of EasyJet and Ryanair, everybody wants a no-frills carrier. Holiday company MyTravel is limbering up for a low-cost launch. Ciao Fly, which runs daily flights to Italy, made its debut at Luton this month.
British European has just rebranded with the no-frills monicker Flybe.com, while BMI British Midland is opening a second base at Cardiff for its budget carrier bmibaby.
It has never been easier to set up an airline - traditional barriers to entry have come tumbling down.
With valleys full of mothballed planes in the Californian desert, aircraft are available on ten-a-penny leases. Brussels has cut through red tape on European routes, allowing liberal access to airport slots. Meanwhile, the internet means rock-bottom marketing costs - no more vast call centres or networks of fussy travel agents.
There are thousands of entrepreneurs who dream of being Stelios Haji-Ioannou. With a little imagination, the sky is no limit. The Guardian presents a step-by-step guide to starting your own budget airline.
1 Get the planes
The Boeing 737 is the standard workhorse of the no-frills operator. But with a catalogue price of some pounds 30-40m, your Prince's Trust young enterprise grant is going to be stretched. A simpler solution is to go to one of the world's top two leasing companies - International Lease Finance Corporation or GE Capital - and borrow a couple of ageing aircraft.
However, renting a plane is a good deal tougher than renting a car or a video. Leasing firms don't release their 40-tonne machines to any Tom, Dick or Harry.
Toby Nicol, director of corporate affairs at EasyJet, says: "Depending on how progressive they are, they may either laugh at you or think you're the next Stelios. What they think of you will determine the fee."
With a sharp suit, a bit of sweet-talking and a lot of luck, the big boys could be persuaded to hand over an initial two 737s - enough for an embryonic airline - for perhaps $150,000 (pounds 100,000) a month.
2 Hire the staff
To work the fleet to the limit, each plane needs six sets of crew - each consisting of two pilots and four cabin crew.
Pilots don't come cheap. Even on low-cost carriers, they typically earn pounds 60,000 a year. A spokesman for the British Airline Pilots' Association suggests dipping into the armed forces: "Quite a few pilots come from the armed forces - airlines like that, because there's less training involved.
"Obviously you can't just step out of a Tornado and straight into a 737 but it's more a question of refreshing their training than starting from scratch."
There is never a shortage of budding travellers wanting to become stewards and stewardesses. But a new carrier will need experienced staff to cope with inevitable early hiccups. One airline source says: "You might find it difficult to get experienced people. They might not think it's a dream move."
3 Apply for a licence
This is tricky. Anyone who wants to run an airline in Britain needs an air operators' licence. A four-page application form is available on the Civil Aviation Authority's website, with basic questions about routes, planes, directors' names and ownership.
But if the government doesn't like the look of you, it can make life difficult. The rules say that any airline must prove that it is "financially viable", with enough money to avoid leaving passengers stranded. The CAA declined to elaborate on the precise nature of "viability", which means it can set the hurdle where it likes.
EasyJet hit on an innovative solution - it "borrowed" a licence from a Luton charter firm, Air Foyle. In its early days, EasyJet was a virtual airline - its flights were on Air Foyle planes, captained by Air Foyle pilots. The only distinctive feature was EasyJet's phone number, painted in bright orange letters along the side. It was some time before founder Stelios Haji-Ioannou got round to obtaining a full operating licence himself.
4 Secure the slots
This is where charm, chutzpah and charisma come into play. Particularly at airports around London, take-off and landing slots are at a premium. Smaller carriers constantly complain of being squeezed out.
Slots at BAA's seven British airports are handled by a special agency, Airport Co-ordination Ltd. A helpful chap manning the phones suggests a spot of networking. He reckons the best place to start will be Vancouver in September, for the annual scheduling conference of the International Air Transport Association: "You can make informal contact with people there, then submit a request to us by telex."
A spokesman for Britain's low-cost mecca, Stansted Airport, is not encouraging, advising that available slots are largely in the quiet middle of the day - useless for that businessman with a 9am meeting in Frankfurt.
But Luton is more encouraging. Passenger services director Natalie Raper says: "We've got slots for you. Even if you're going to destinations already served by the airport, we'd welcome the fresh competition. We'd nurture your airline and do everything we possibly could to help you."
Theoretically, flying to other EU countries doesn't require any government approval. It's simply a question of negotiating with foreign airports. By picking particularly outlandish destinations, Ryanair and Buzz have even persuaded some overseas airports to pay them for their custom. Ambitions to break into Paris Charles de Gaulle are best forgotten for the time being, although a helpful airline source suggests that Munich is looking empty.
5 Outsource everything on the ground
The likes of Go, EasyJet and Ryanair rarely bother employing more than a handful of staff at airports. They contract out most jobs to specialist agencies.
Groundstar, a Newcastle-based handling agent, recently took on one of the trickiest accounts in the low-cost world - handling Ryanair's flights at Stansted. Ryanair was forced to admit this month that problems have followed, with tem pers rising due to staff shortages and broken baggage belts.
An assistant at Groundstar's head office says however that the company provides an A to Z service for airlines. Its staff check in passengers, load bags, check passports, clean aircraft, "push back" planes for take-off and pacify angry travellers.
However, our airline will also need a fuel supplier and a catering contractor, even if on-board meals amount to nothing more than Pringles and limp chicken sandwiches.
Ground-handling in Britain is dominated by a handful of agencies - notably Servisair and Aviance (until recently known as Reed Aviation).
Arrangements at continental destinations can be more informal, according to weary airline executives. One aviation source says: "The boss of an airport might tell us we can land there. But he'll say: "you must use Jose's fuel and my cousin's catering company"."
6 Set up the website
Selling seats on the internet is much cheaper than running a call centre or using travel agents. But the software is critical - it needs to incorporate "yield management", with prices constantly adjusted according to availability on each flight.
EasyJet has come a cropper with its reservation software. The airline says it spent pounds 2m writing its own booking system. But a US firm, Navitaire, has launched legal action, accusing EasyJet of software piracy. Getting the website right will be crucial to the success of the airline - passengers are guaranteed to be alienated by a site which keeps crashing.
If all goes well, the time from conception to take-off could be as little as six months. But be warned - flying is a risky business. Robert Crandall, former boss of the world's biggest carrier American Airlines, recently pointed out that the world's airline industry has lost as much money as it has made since the Wright Brothers invented manned, powered flight at Kitty Hawk in 1903. Some City investors joke that the best way to deliver shareholder value would have been to shoot the brothers down.
It may be easier than ever to get off the ground. But canny airline executives say there is only one sure-fire way to make a small fortune in the aviation industry - start with a big fortune.
"Forget broadband telecoms, boutique investment banks and branded restaurant chains. The trendiest business opportunity of the moment is spartan, ascetic and charges customers pounds 3.95 for a sandwich. A budget airline is this year's surefire way to make a million.
Swept along in the tailwind of EasyJet and Ryanair, everybody wants a no-frills carrier. Holiday company MyTravel is limbering up for a low-cost launch. Ciao Fly, which runs daily flights to Italy, made its debut at Luton this month.
British European has just rebranded with the no-frills monicker Flybe.com, while BMI British Midland is opening a second base at Cardiff for its budget carrier bmibaby.
It has never been easier to set up an airline - traditional barriers to entry have come tumbling down.
With valleys full of mothballed planes in the Californian desert, aircraft are available on ten-a-penny leases. Brussels has cut through red tape on European routes, allowing liberal access to airport slots. Meanwhile, the internet means rock-bottom marketing costs - no more vast call centres or networks of fussy travel agents.
There are thousands of entrepreneurs who dream of being Stelios Haji-Ioannou. With a little imagination, the sky is no limit. The Guardian presents a step-by-step guide to starting your own budget airline.
1 Get the planes
The Boeing 737 is the standard workhorse of the no-frills operator. But with a catalogue price of some pounds 30-40m, your Prince's Trust young enterprise grant is going to be stretched. A simpler solution is to go to one of the world's top two leasing companies - International Lease Finance Corporation or GE Capital - and borrow a couple of ageing aircraft.
However, renting a plane is a good deal tougher than renting a car or a video. Leasing firms don't release their 40-tonne machines to any Tom, Dick or Harry.
Toby Nicol, director of corporate affairs at EasyJet, says: "Depending on how progressive they are, they may either laugh at you or think you're the next Stelios. What they think of you will determine the fee."
With a sharp suit, a bit of sweet-talking and a lot of luck, the big boys could be persuaded to hand over an initial two 737s - enough for an embryonic airline - for perhaps $150,000 (pounds 100,000) a month.
2 Hire the staff
To work the fleet to the limit, each plane needs six sets of crew - each consisting of two pilots and four cabin crew.
Pilots don't come cheap. Even on low-cost carriers, they typically earn pounds 60,000 a year. A spokesman for the British Airline Pilots' Association suggests dipping into the armed forces: "Quite a few pilots come from the armed forces - airlines like that, because there's less training involved.
"Obviously you can't just step out of a Tornado and straight into a 737 but it's more a question of refreshing their training than starting from scratch."
There is never a shortage of budding travellers wanting to become stewards and stewardesses. But a new carrier will need experienced staff to cope with inevitable early hiccups. One airline source says: "You might find it difficult to get experienced people. They might not think it's a dream move."
3 Apply for a licence
This is tricky. Anyone who wants to run an airline in Britain needs an air operators' licence. A four-page application form is available on the Civil Aviation Authority's website, with basic questions about routes, planes, directors' names and ownership.
But if the government doesn't like the look of you, it can make life difficult. The rules say that any airline must prove that it is "financially viable", with enough money to avoid leaving passengers stranded. The CAA declined to elaborate on the precise nature of "viability", which means it can set the hurdle where it likes.
EasyJet hit on an innovative solution - it "borrowed" a licence from a Luton charter firm, Air Foyle. In its early days, EasyJet was a virtual airline - its flights were on Air Foyle planes, captained by Air Foyle pilots. The only distinctive feature was EasyJet's phone number, painted in bright orange letters along the side. It was some time before founder Stelios Haji-Ioannou got round to obtaining a full operating licence himself.
4 Secure the slots
This is where charm, chutzpah and charisma come into play. Particularly at airports around London, take-off and landing slots are at a premium. Smaller carriers constantly complain of being squeezed out.
Slots at BAA's seven British airports are handled by a special agency, Airport Co-ordination Ltd. A helpful chap manning the phones suggests a spot of networking. He reckons the best place to start will be Vancouver in September, for the annual scheduling conference of the International Air Transport Association: "You can make informal contact with people there, then submit a request to us by telex."
A spokesman for Britain's low-cost mecca, Stansted Airport, is not encouraging, advising that available slots are largely in the quiet middle of the day - useless for that businessman with a 9am meeting in Frankfurt.
But Luton is more encouraging. Passenger services director Natalie Raper says: "We've got slots for you. Even if you're going to destinations already served by the airport, we'd welcome the fresh competition. We'd nurture your airline and do everything we possibly could to help you."
Theoretically, flying to other EU countries doesn't require any government approval. It's simply a question of negotiating with foreign airports. By picking particularly outlandish destinations, Ryanair and Buzz have even persuaded some overseas airports to pay them for their custom. Ambitions to break into Paris Charles de Gaulle are best forgotten for the time being, although a helpful airline source suggests that Munich is looking empty.
5 Outsource everything on the ground
The likes of Go, EasyJet and Ryanair rarely bother employing more than a handful of staff at airports. They contract out most jobs to specialist agencies.
Groundstar, a Newcastle-based handling agent, recently took on one of the trickiest accounts in the low-cost world - handling Ryanair's flights at Stansted. Ryanair was forced to admit this month that problems have followed, with tem pers rising due to staff shortages and broken baggage belts.
An assistant at Groundstar's head office says however that the company provides an A to Z service for airlines. Its staff check in passengers, load bags, check passports, clean aircraft, "push back" planes for take-off and pacify angry travellers.
However, our airline will also need a fuel supplier and a catering contractor, even if on-board meals amount to nothing more than Pringles and limp chicken sandwiches.
Ground-handling in Britain is dominated by a handful of agencies - notably Servisair and Aviance (until recently known as Reed Aviation).
Arrangements at continental destinations can be more informal, according to weary airline executives. One aviation source says: "The boss of an airport might tell us we can land there. But he'll say: "you must use Jose's fuel and my cousin's catering company"."
6 Set up the website
Selling seats on the internet is much cheaper than running a call centre or using travel agents. But the software is critical - it needs to incorporate "yield management", with prices constantly adjusted according to availability on each flight.
EasyJet has come a cropper with its reservation software. The airline says it spent pounds 2m writing its own booking system. But a US firm, Navitaire, has launched legal action, accusing EasyJet of software piracy. Getting the website right will be crucial to the success of the airline - passengers are guaranteed to be alienated by a site which keeps crashing.
If all goes well, the time from conception to take-off could be as little as six months. But be warned - flying is a risky business. Robert Crandall, former boss of the world's biggest carrier American Airlines, recently pointed out that the world's airline industry has lost as much money as it has made since the Wright Brothers invented manned, powered flight at Kitty Hawk in 1903. Some City investors joke that the best way to deliver shareholder value would have been to shoot the brothers down.
It may be easier than ever to get off the ground. But canny airline executives say there is only one sure-fire way to make a small fortune in the aviation industry - start with a big fortune.
Join Date: May 2002
Location: preston
Posts: 433
Likes: 0
Received 0 Likes
on
0 Posts
food
why do short haul airlines offer food? dont know about anyone else but if im flying a short distance i dont want anything to eat. its the same on the train, if im going from preston to manchester i dont want anything to eat. im guessing its a way of making some money.
Join Date: Mar 2000
Location: Belfast, N. Ireland
Posts: 55
Likes: 0
Received 0 Likes
on
0 Posts
newswatcher,
you forgot to mention :
1. Crew Transport - getting ur postioning and dead head crews about is our responsibility
2. Delays and Diversions - when ur 737s go "tech" and u haven't got a spare cos GE won't give you one, and u can't sub it cos there are no a/c available or when every airport in the UK is closed cos of WX
in these instances you should be talking to us - Britain's lowest flying airline - to coach your passengers between any airport in the British Isles (and yes that includes Belfast, Dublin et al.) and to get them where they are supposed to be going !
We are a small but important part of the loop !
you forgot to mention :
1. Crew Transport - getting ur postioning and dead head crews about is our responsibility
2. Delays and Diversions - when ur 737s go "tech" and u haven't got a spare cos GE won't give you one, and u can't sub it cos there are no a/c available or when every airport in the UK is closed cos of WX
in these instances you should be talking to us - Britain's lowest flying airline - to coach your passengers between any airport in the British Isles (and yes that includes Belfast, Dublin et al.) and to get them where they are supposed to be going !
We are a small but important part of the loop !
Join Date: Jun 2002
Location: Newcastle Upon Tyne, UK
Posts: 193
Likes: 0
Received 0 Likes
on
0 Posts
So lets say that you would like to find out more information about setting up your own small airline. Where do you manage to get the amount of money required for a start. I would think you would need about 1 million at least to start an airline.
The only way to do it would be to have extremely rich parents right?
The only way to do it would be to have extremely rich parents right?
Join Date: Jun 2002
Location: UK
Posts: 27
Likes: 0
Received 0 Likes
on
0 Posts
...and the rest!
Add up all the costs of setting up, paying your staff, leasing or buying aircraft, marketing etc - then you have to prove to the authorities that you have enough cash to be able to cover the first 90 days operations assuming that you have no positive income.
Add up all the costs of setting up, paying your staff, leasing or buying aircraft, marketing etc - then you have to prove to the authorities that you have enough cash to be able to cover the first 90 days operations assuming that you have no positive income.
Join Date: Jun 2002
Location: Newcastle Upon Tyne, UK
Posts: 193
Likes: 0
Received 0 Likes
on
0 Posts
It is impossible for a 'normal' person to want to set up a business like that. Even if it was the smallest regioanl airline you could find, absoloutely impossible without at least 1 million.
Join Date: Nov 2001
Location: 18nm N of LGW
Posts: 238
Likes: 0
Received 0 Likes
on
0 Posts
Having done this twice. Your start-up capital requirement would not be less than £8m - possibly more. The investors would want to see an early start-up too. Waiting around for 9 months to get things off the ground, while you are using their money, is a frightener for ALL investors.
ALL the planning has to be done with ALL the leading staff 'in place' or at least some commitment to the company.
As newswatcher says there is a lot to do.
The last thing is the preparation of a business plan like no other. Concise, about 15 pages, with three years income and showing loss and profits.
Last of all. People who know the business backwards and forwards and can satisfy the CAA in quicktime. And who have a GOOD track record in the industry.
AND a WHOLE lot more besides.
The airline industry is a high risk business and getting cheap aircraft is NOT the answer - there is much much more to it than that.
I must write a book about it one day!
ALL the planning has to be done with ALL the leading staff 'in place' or at least some commitment to the company.
As newswatcher says there is a lot to do.
The last thing is the preparation of a business plan like no other. Concise, about 15 pages, with three years income and showing loss and profits.
Last of all. People who know the business backwards and forwards and can satisfy the CAA in quicktime. And who have a GOOD track record in the industry.
AND a WHOLE lot more besides.
The airline industry is a high risk business and getting cheap aircraft is NOT the answer - there is much much more to it than that.
I must write a book about it one day!
Join Date: Aug 2000
Location: CH-4633 Hauenstein, Switzerland
Posts: 15
Likes: 0
Received 0 Likes
on
0 Posts
split AOC
- one for the aircraft owner who stays fully responsible for the technical state of the plane;
- one for every operating crew dryleasing the plane for at least one day
just an idea and some more brainstorming on
http://home.tiscalinet.ch/maxlenz/sw.../manacrew.html
- one for every operating crew dryleasing the plane for at least one day
just an idea and some more brainstorming on
http://home.tiscalinet.ch/maxlenz/sw.../manacrew.html
Join Date: Mar 2002
Location: back at the grind stone
Posts: 199
Likes: 0
Received 0 Likes
on
0 Posts
So out of general interest. How simple can you make it ?
Can you run your low cost operation with aircraft on ACMI leases, just adding a route structure, ticketing and subbed out ground /terminal services.
Anyone got any hard figures on a 733 lease deal, plus deposits etc required. What would be the projected monthly or weekly break even on a 1 or 2 ship operation.
Of course the only big problem would be getting a foot hold in the market. Why will Joe public fly your operation and not goeasy, fr etc. The only answer I can see is the route, or rather departure location. Don't be fools now, you CAN'T compete on price on the same route. they will slaughter you.
So you need to depart from an exclusive airport and serve the popular destination. But surely everyone knows this and soon all the viable option will be gone. Unless (like me) your a smart business person and can make your opertunities. After all what else is left or is only being used on a minimal basis.
Southampton, Bournemouth (Fr hardly using it), Exeter, Southend, Manston, Cambridge, Leeds, Humberside, Coventry, Norwich. Any others ?
I would only say three of these would have a shot at being viable. Bournemouth, Camb. & Cov. The other option would be to open up a site elsewhere not currently used for passenger flights, or rather to encourage someone else to fund it and you bring in the traffic. Thats where the smart thinking comes in.
Can you run your low cost operation with aircraft on ACMI leases, just adding a route structure, ticketing and subbed out ground /terminal services.
Anyone got any hard figures on a 733 lease deal, plus deposits etc required. What would be the projected monthly or weekly break even on a 1 or 2 ship operation.
Of course the only big problem would be getting a foot hold in the market. Why will Joe public fly your operation and not goeasy, fr etc. The only answer I can see is the route, or rather departure location. Don't be fools now, you CAN'T compete on price on the same route. they will slaughter you.
So you need to depart from an exclusive airport and serve the popular destination. But surely everyone knows this and soon all the viable option will be gone. Unless (like me) your a smart business person and can make your opertunities. After all what else is left or is only being used on a minimal basis.
Southampton, Bournemouth (Fr hardly using it), Exeter, Southend, Manston, Cambridge, Leeds, Humberside, Coventry, Norwich. Any others ?
I would only say three of these would have a shot at being viable. Bournemouth, Camb. & Cov. The other option would be to open up a site elsewhere not currently used for passenger flights, or rather to encourage someone else to fund it and you bring in the traffic. Thats where the smart thinking comes in.
Last edited by Oscar Duece; 6th Sep 2002 at 09:33.
