How to Start an Airline

Summary

This video explores the challenges and opportunities in starting a new airline, particularly in the wake of the COVID-19 pandemic. It highlights the unique business models of promising new airlines, such as FlyPop, Play Airlines, and Breeze Airways, which are focusing on niche markets rather than directly competing with established giants. The script delves into the complexities of securing funding, acquiring necessary certifications, and acquiring aircraft, emphasizing that while the startup process is difficult, it’s still possible to succeed with the right business model and execution. The video also touches on the philosophy of Skillshare as a platform for learning new skills.

Takeaways

• 😀 Crisis can be an equalizer in business, as it levels the playing field and allows smaller players to compete with industry giants.
• 😀 The airline industry is experiencing turmoil due to the Coronavirus pandemic, presenting an opportunity for new entrepreneurial ventures.
• 😀 Starting a new airline is extremely difficult due to the capital intensity and complexity of the industry, but it is occasionally done successfully.
• 😀 A successful startup airline needs a unique business model that sets it apart from competitors, focusing on offering something better—cheaper, faster, or more convenient.
• 😀 Competing directly with major full-service network carriers is almost impossible for new airlines due to their size and resources.
• 😀 Recent successful examples of new airlines include FlyPop, Play Airlines, and Breeze Airways, all of which have unique business models that do not directly compete with large carriers.
• 😀 Start-up airlines generally have to avoid engaging in price wars with larger airlines, as they lack the financial resources to sustain such a battle.
• 😀 Securing funding for a startup airline is one of the biggest challenges, with few investors willing to back the industry due to its thin profit margins and volatility.
• 😀 Obtaining an air operator’s certificate is a significant hurdle in the process of launching an airline, with different certification types available depending on the airline's operations.
• 😀 Acquiring aircraft for a new airline can be easier than expected, as many airlines opt to lease rather than own their planes, helping to reduce costs and risk.
• 😀 Despite the complexity of starting an airline, business model selection, funding, certification, and aircraft acquisition are the four largest hurdles for a successful launch.

Q & A

What makes starting a new airline so difficult?

Starting a new airline is extremely challenging due to its complexity and capital intensity. It requires securing significant funding, navigating strict legal and regulatory requirements, and competing against established giants in the industry. Additionally, achieving the necessary scale to compete with major airlines is virtually impossible without massive resources.

What does an airline need in order to succeed in today’s market?

For an airline to succeed, it needs a strong, defined, and unique business model. The airline must offer something better than its competitors, whether it's lower prices, better convenience, or unique services. New airlines often differentiate themselves by targeting underserved markets or offering low-cost alternatives.

Why is finding funding for a new airline so difficult?

The airline industry has very little upside for investors, with a history of fluctuating profits and high operational costs. Despite the potential for growth, investors often prefer safer, more profitable industries, like railroads. This lack of appetite for airline investments leads to many start-up airlines failing to secure the necessary funding.

What role does crisis play in the airline industry?

Crisis, such as the impact of the Coronavirus pandemic, can serve as an equalizer in the airline industry. It forces companies to reassess their strategies and offers smaller players the opportunity to innovate and make bold moves. This levels the playing field, providing new entrants the chance to succeed where they otherwise might not.

What are the types of air operator’s certificates, and how do they differ?

There are two main types of air operator’s certificates in the US: the Part 135 certificate, which is easier to obtain and often used for cargo and small charter operations, and the Part 121 certificate, which is required for large, scheduled commercial airlines. Part 121 certificates involve a much more complicated and costly process to obtain.

What are some of the challenges faced by new airlines when acquiring aircraft?

Acquiring aircraft can be a complex and expensive task for new airlines. Most start-up airlines lease their planes rather than purchasing them outright, which helps spread the cost and reduce risk. However, new airlines may also enter into leaseback agreements with aircraft manufacturers or third-party leasing companies to acquire the planes they need without having to pay upfront.

How do start-up airlines differentiate themselves from established competitors?

Start-up airlines differentiate themselves by offering unique routes, lower-cost options, or services that major carriers do not provide. For instance, FlyPop plans to serve secondary cities in India, Play Airlines targets budget transatlantic flights with connections through Iceland, and Breeze Airways focuses on underserved domestic routes in the US.

Why do new airlines often focus on niche markets?

New airlines often focus on niche markets because competing directly with large, full-service network carriers is almost impossible. Major airlines have the resources to dominate price wars and expand globally, while smaller entrants must focus on underserved or niche routes to carve out their own space in the market.

What makes the airline industry a tough sector for investors?

The airline industry is risky for investors due to its cyclical nature, which depends heavily on fluctuating oil prices and economic conditions. Even during the best times, airlines have thin profit margins, which makes other industries like railroads more appealing for long-term investment.

What strategies do start-up airlines like Breeze Airways use to obtain aircraft?

Start-up airlines like Breeze Airways often lease aircraft rather than purchasing them outright. They may also enter into leaseback agreements with third-party companies or manufacturers, which allows them to acquire aircraft more quickly and at a lower upfront cost. For example, Breeze Airways has made an order for A220 aircraft but has arranged to lease some of them back to reduce costs and risks.