How to start an airline company
Photo by Joseph Younis (Flickr)
Entrepreneurs looking at starting airline companies have to look beyond revenues to discover the challenges of the aviation industry. "Aviation Week"'s 2007 survey of airlines found plenty of good news for Deutsche Lufthansa AG ($33.9 billion in revenues), Air Canada ($10.3 billion) and Delta Airlines ($18.9 billion).
Airline executives and boards of directors have struggled with labour strife, competition from regional carriers and increasing fuel costs. Your mettle as an airline owner will be tested early as high expenses eat up revenues and start-up funds quickly.
Gain expertise on the future of finances, technology and consumer demand in the airline industry before investing money. Boeing's Current Market Outlook covers new aeroplane orders, customer demand and new technology in the airline industry through 2027. These projections can help you determine if a charter, regional or international airline is the right business opportunity.
Spend several months compiling data and developing content for your business plan before starting an airline. Your business plan should feature your airline name, logo, mission statement and long-term objectives in the first chapter. The remaining sections should highlight start-up funds, projected expenses and the geographic limits of your airline to attract investors.
Combine your business plan with a brief sales presentation before seeking a first round of investment capital. Your presentation should highlight profit projections, ticket pricing and other hard financial data instead of vague business goals. After exhausting investments from friends and colleagues, make an appointment with a venture capital firm to secure an investment for your airline. Bridge the gap between personal and investment capital with commercial loans secured from a local bank.
Secure a land lease from an airport in your community before acquiring aircraft. Nampa Municipal Airport and other airfields lease out runway and hangar space to airlines through their governing bodies. If you need to build or expand a hangar, you will need to seek a construction waiver from the airport authority several months before building starts.
Complete the four-phase application process for an air carrier certification from the FAA. The FAA requires new airlines to submit to assessments of aeroplane safety plans, maintenance routines and the airworthiness of planes before certification is granted. Since the air carrier application can take months to complete, you should submit your application materials while you seek initial funding.
Protect your airline from lawsuits and financial damages with airline insurance from a provider like Assurant International Brokerage Corporation. Airline insurance covers everything from workers' compensation for full-time staff to damages on leased airport property in case of accidents and acts of God.
Negotiate aeroplane leases for passenger aircraft from companies like Cessna as you start your airline. Plan trips to your aeroplane supplier's production facility to inspect planes for capacity, amenities and instrumentation. Ask your sales representative if there are lease-to-own opportunities and maintenance planes to get more value for your investment.
Secure a jet fuel contract with an energy company like Shell Aviation to keep your flights in the air. Shell Aviation supplies jet fuel for small, medium and large aircraft worldwide that contains performance-enhancing additives. Shop around for local and regional fuel companies that can offer lower per-barrel rates on fuel shipped from nearby refineries.
Recruit qualified pilots, mechanics and attendants for your airline months before your first flight. Your pilots should be currently licensed by the FAA and experienced in handling various aircraft sizes to handle scheduled and charter flights. Airline mechanics and attendants can get acclimated with your fleet of aeroplanes before actual flights take place.
Advertise for baggage handlers, skycaps and counter personnel as your airline enters the last month of preparations. Conduct a company-wide training on ticketing, flight schedules and the airline's philosophy on customer service with newly hired employees. Emphasise the importance of passenger safety on each flight as you teach ticketing agents to weigh carry-ons and distribute boarding passes.
Install ticket printers, luggage tags, scales and other equipment in the counter space at your home airport. Consult with your state's department of weights and measures to determine if your luggage scale is calibrated accurately. Your ticketing agents should practice every procedure in your customer service manual including refunds, e-tickets and boarding passes before your airline opens.
Sit down with your pilots to complete FAA flight plans for every route flown by your airline. Each scheduled flight must be submitted to the FAA complete with altitude, route, speed and destination airport. Keep copies of each FAA flight plan, and review plans every month in case of route amendments.
- Arrange landing clearances and land leases with other airports before your airline's first flight. Regional airlines should work with controllers at destination airports to determine runway access for scheduled arrivals. A major airline may need to acquire hangar space and counter access to handle daily flights in popular destinations.
- Compare ticket prices to your major destinations with other airlines to price your flights competitively. Avoid the temptation to undercut mid-sized and major airlines with low prices without thinking about labour, fuel and maintenance costs. While your profits may be low in the first 3 to 5 years, your prices should be sufficient to cover most operational costs.
- Work closely with representatives from pilot, attendant and mechanic unions to avoid strikes. Your skilled employees will belong to trade unions that press for fewer flights, greater wages and improved benefits due to the industry's massive revenues. An airline that tries to undercut its pilots and attendants will find its flights cancelled due to labour strikes.
- Photo by Joseph Younis (Flickr)