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Starting an Airline

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Re: Starting an Airline

#91

Post by uuilly »

dekhn wrote: post #85
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.

Air travel in the US is a massively subsidized business (the government gives huge amounts of money to Boeing to make next-gen warcraft, then Boeing translates those R&D concepts into airplanes. The airlines were, for a long time, subsidized by air post. Fuel prices are still much lower than they could be. These things are barely directly profitable, but they contribute immensely to the global economy. That's the int…

Defense contracts are not subsidies. They are won by competition with the likes of Lockheed. Most of the money won is spent providing the product or service. The profit margins on defense contracts are not nearly large enough to "subsidize" an airline business. Yes, some R&D crosses over but it's no easy trick. Lockheed does not play in the commercial space at all.

Disclosure: Former Boeing Employee.

Re: Starting an Airline

#92

Post by pc86 »

dekhn wrote: post #85
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.

Air travel in the US is a massively subsidized business (the government gives huge amounts of money to Boeing to make next-gen warcraft, then Boeing translates those R&D concepts into airplanes. The airlines were, for a long time, subsidized by air post. Fuel prices are still much lower than they could be. These things are barely directly profitable, but they contribute immensely to the global economy. That's the int…

That's not a subsidy in the true sense of the word, though. It's a company using a massively profitable but specialized industry (blowing stuff up as efficiently/quickly/quietly/spectacularly as possible) to fund a much smaller-margin but comparatively very broad industry (commercial aeronautics).

Re: Starting an Airline

#93

Post by twistedpair »

k-mcgrady wrote: post #20
leokun wrote: post #12

Earlier quoted context omitted.

It's very strange given how necessary air travel is. It still surprises me how need and margins are inversely related (luxury goods have high margins, commodities low), but it makes sense. It's the price. The price of travel is so high for most consumers that they're going to optimize on price at the sacrifice of everything else. The cost of flying and operating an airline is so expensive that airlines also optimize…

>> "It's very strange given how necessary air travel is" I haven't given this much thought but a lot of it isn't necessary at all. 1. Vacations abroad - vacation in your own country or take a boat 2. Business - a lot of business can now be conducted online which previously required air travel I'm sure those two things alone make up a vast portion of the consumer air travel market.

Much of the economy depends on cheap air travel.

As an example consider the trouble for businesses if they could not mail legal documents or critical parts overnight. Consider Disney World vacations if everyone had to drive across the country to get there. Consider all the cities in the country that would wilt because no one wants to drive all the way there. Consider people not wanting to drive 18 hours to attend the Super Bowl.

A lot of money moves around the country on those planes one way or another.

Re: Starting an Airline

#94

Post by hershel »

GFischer wrote: post #42
k-mcgrady wrote: post #20

Earlier quoted context omitted.

>> "It's very strange given how necessary air travel is" I haven't given this much thought but a lot of it isn't necessary at all. 1. Vacations abroad - vacation in your own country or take a boat 2. Business - a lot of business can now be conducted online which previously required air travel I'm sure those two things alone make up a vast portion of the consumer air travel market.

On point 2), humans are still very much "social animals", and time and time again I see that business works a lot better face to face, and trust is much more easily gained. That has been repeatedly established, and there are very strong reasons why people with very limited time still travel a lot of hours to conduct their business. Not everyone is the same, but it is the norm rather than the exception. http://www.iac…

There are technologies today , for example teleconference rooms, which probably capture most verbal and non-verbal feedbackin meetings, to the points participants claim it's like being there.

It would be interesting to do an experiment:isolate someone for a period of time, but let him have full contact with family and friends via the best electronic means we have , and measure the impact of his mood and well-being.

Re: Starting an Airline

#95

Post by jskonhovd »

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…

We definitely need something like that in the Southeast. Our infrastructure is so awful. My dream would be high speed rail between all the major cities and SEC colleges, and Panama City.

Re: Starting an Airline

#96

Post by twistedpair »

patmcguire wrote: post #21
squidi wrote: post #4

The airline industry has the lowest return on invested capital of any industry: http://centreforaviation.com/images/stories/2013/jul/05/ROIC... This analysis from McKinsey is worth a read: http://www.iata.org/whatwedo/Documents/economics/Profitabili...

Those are some baffling infographics.

Clearly the McKinsey infographic guys never took geometry. I'm surprised at the elementary mistakes like scaling bubble charts by radius rather than by area. Makes the Asia airmarket growth look like 37000% rather than the actual 600%.

Re: Starting an Airline

#97

Post by nether »

sharkweek wrote: post #78
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 fligh…

On the plus side, they only charged me an oversize fee ~$30 for my bicycle, versus the astounding $200 US Airways charges one-way.

Re: Starting an Airline

#98

Post by nether »

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.

My photo sharing app isn't a "big" problem?! There are people running businesses that can actually kill people if mismanaged?!

Re: Starting an Airline

#99

Post by bulte-rs »

pionar wrote: post #88
bulte-rs wrote: post #70

Earlier quoted context omitted.

The problem with wet leasing is that it doesn't scale. Try operating an airline with 300 planes under wet-lease and still make a profit.

Why does it have to scale? Maybe it's not meant to scale. Not EVERYTHING IN THE WORLD HAS TO SCALE.

Yes it does ;)

Pivoting in the airline business is difficult, changing from planes to boats is cumbersome; scaling is the only option.

(And my planes scaled from toy size to 1:1)

Re: Starting an Airline

#100

Post by twistedpair »

squidi wrote: post #4

The airline industry has the lowest return on invested capital of any industry: http://centreforaviation.com/images/stories/2013/jul/05/ROIC... This analysis from McKinsey is worth a read: http://www.iata.org/whatwedo/Documents/economics/Profitabili...

Now Exxon just needs to buy Boeing and then start and airline bringing the full powers of vertical integration to bear. That's probably the only way to make a dime consistently.
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