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Starting an Airline

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Re: Starting an Airline

#71

Post by bane »

masklinn wrote: post #33
pkorzeniewski wrote: post #22

It blows my mind how people start such big businesses. You must build an airport, hire stuff, buy planes, meet many legal requirements and so on, all costing tens of millions of dollars, and on top of that, it must be profitable. This gives some insight, but still it's terryfing. I feel so small.

> You must build an airport Most definitely not. You do need to rent or buy space (and ideally slots) at a bunch of airports. You can also lease planes.

You can also be a contract airline that fills up routes for other airlines. Lots of the "operated by xyz airline" on weird routes are run by airlines that nobody has ever heard of outside of that notice on their ticket.

Re: Starting an Airline

#72

Post by 3pt14159 »

rayiner wrote: post #34
pkorzeniewski wrote: post #22

It blows my mind how people start such big businesses. You must build an airport, hire stuff, buy planes, meet many legal requirements and so on, all costing tens of millions of dollars, and on top of that, it must be profitable. This gives some insight, but still it's terryfing. I feel so small.

The key observation is that the airport is built on credit (by the government, not the airline, using bonds), and the airplanes are usually either bought on credit or leased (in which case they are built by the airline on credit). It's an illustration of why banks and bank debt are so important in our economy! This capital-intensive sort of business doesn't happen by an entrepreneur writing a $1 billion check from fu…

Well they do still write $1 billion dollar cheques. Otherwise where did the bank get the billion dollars to lend someone else? :)

Edit: I think I need to dial down the subtly of my humour.

Re: Starting an Airline

#73

Post by pbj »

There was a fascinating article on HN a few months ago (don't have the link handy at the moment) about how most major airlines make less than 25 cents profit on each ticket sold. It's pretty mind blowing when you consider the entire industry operates on such margins.

Re: Starting an Airline

#74

Post by mmariani »

pkorzeniewski wrote: post #22

It blows my mind how people start such big businesses. You must build an airport, hire stuff, buy planes, meet many legal requirements and so on, all costing tens of millions of dollars, and on top of that, it must be profitable. This gives some insight, but still it's terryfing. I feel so small.

It gets a little easier when a company does not follow some legal requirements. [1]

[1] http://www.youtube.com/watch?v=WcrmyWsflTM

Re: Starting an Airline

#75

Post by wodow »

3pt14159 wrote: post #72
rayiner wrote: post #34

Earlier quoted context omitted.

The key observation is that the airport is built on credit (by the government, not the airline, using bonds), and the airplanes are usually either bought on credit or leased (in which case they are built by the airline on credit). It's an illustration of why banks and bank debt are so important in our economy! This capital-intensive sort of business doesn't happen by an entrepreneur writing a $1 billion check from fu…

Well they do still write $1 billion dollar cheques. Otherwise where did the bank get the billion dollars to lend someone else? :) Edit: I think I need to dial down the subtly of my humour.

A bank doesn't necessarily need a billion dollars to lend a billion dollars...

Re: Starting an Airline

#76

Post by benjamincburns »

3pt14159 wrote: post #72
rayiner wrote: post #34

Earlier quoted context omitted.

The key observation is that the airport is built on credit (by the government, not the airline, using bonds), and the airplanes are usually either bought on credit or leased (in which case they are built by the airline on credit). It's an illustration of why banks and bank debt are so important in our economy! This capital-intensive sort of business doesn't happen by an entrepreneur writing a $1 billion check from fu…

Well they do still write $1 billion dollar cheques. Otherwise where did the bank get the billion dollars to lend someone else? :) Edit: I think I need to dial down the subtly of my humour.

The Fed.

http://en.wikipedia.org/wiki/Federal_Reserve_System#Monetary...

Re: Starting an Airline

#77

Post by cjrp »

peckrob wrote: post #69
ubernostrum wrote: post #60

Earlier quoted context omitted.

While there have been a few attempts at competing on other metrics (there were several attempts to start business-class only airlines in the late 90s and early 2000s) There are still business-catered offerings, they just tend to be a division of a parent (legacy) carrier. US Airways and Delta's "shuttle" offerings between major business destinations on the east coast stand out as an example. A couple of the large air…

> It's just that there doesn't seem to be enough demand to sustain an entire airline dedicated to the idea. Yeah, this is kind of what I meant. The only people capable of doing this are the majors (and then only on a small handful of mostly-Transatlantic routes). Every attempt so far at building a whole airline around the idea of not competing on price has met with failure. And, as a sidenote, I really want to take t…

Interesting thought, could a newcomer have operated the LCY-JFK service with the same level of success? Or does it need BA's brand behind it to even get off the ground.

P.S. Happy to see fellow aviation geeks here on HN

Re: Starting an Airline

#78

Post by sharkweek »

peckrob wrote: post #51

There's a saying in the airline industry that goes something like this: "What's the fastest way to become a millionaire in the airline industry? Start with a billion dollars." I don't work in the airlines, but I'm a private pilot with lots of friends and family who do work or have worked in the airlines (and in the aviation industry in general). Expenses are high and often unpredictable, and profits are low. A lot of…

I would assume these margins get even thinner and customer service even worse in the future as most people really do just go to a referral site, grab the cheapest flight and call it a day (I mean honestly, where I'm currently at in life, I don't need comfort on a flight, I just need to get from point a to point b as cheaply as possible and I assume this applies to 80% of people flying).

I was just on a Frontier flight a few months ago where nothing but water was free and they were being EXTREMELY strict about carry on size, which produced probably a dozen or so more $25 bag checking fees from people boarding. I have to expect these fees will only continue to grow in order to make up for lost profits on the original sale

Re: Starting an Airline

#79

Post by Aqua_Geek »

peckrob wrote: post #51

There's a saying in the airline industry that goes something like this: "What's the fastest way to become a millionaire in the airline industry? Start with a billion dollars." I don't work in the airlines, but I'm a private pilot with lots of friends and family who do work or have worked in the airlines (and in the aviation industry in general). Expenses are high and often unpredictable, and profits are low. A lot of…

> […] I know there is no way it would be successful.

Here’s an interesting article on a new airline that seems to be doing pretty well: http://www.bbc.co.uk/news/business-23959197.

Granted, it’s a very different kind of airline that Flohr is creating.

Re: Starting an Airline

#80

Post by rayiner »

3pt14159 wrote: post #72
rayiner wrote: post #34

Earlier quoted context omitted.

The key observation is that the airport is built on credit (by the government, not the airline, using bonds), and the airplanes are usually either bought on credit or leased (in which case they are built by the airline on credit). It's an illustration of why banks and bank debt are so important in our economy! This capital-intensive sort of business doesn't happen by an entrepreneur writing a $1 billion check from fu…

Well they do still write $1 billion dollar cheques. Otherwise where did the bank get the billion dollars to lend someone else? :) Edit: I think I need to dial down the subtly of my humour.

U.S. banks have $9.3 trillion in deposits. Since FDIC insurance only goes up to $250,000, and rich people generally have most of their wealth in stocks, bonds, etc, that represents a very broad-based pool of wealth.
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