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Starting an Airline

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Re: Starting an Airline

#101

Post by joonix »

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.

What he/she really means is that it's not profitable. Wet leases are used to fill in gaps for airlines, you don't build an entire airline out of wet leases. If you did you're not doing much other than being a middle man doing bookings for other airlines, and you probably won't be able to compete on price.

Major commercial air travel is a commodity business. Where opportunity lies is perhaps in offering air travel solutions that bypass the hassle of airports. Shuttles between SF, LA or Houston and Dallas for example. These are heavily trafficked routes with mostly business travelers who would love to avoid long security lines and drive right up to a plane at a small airport.

Re: Starting an Airline

#103

Post by bulte-rs »

nether wrote: post #98
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?!

This was exactly my first thought When I came back to the software industry: "IF I mess up, at least I will not kill 195 people".

Re: Starting an Airline

#104

Post by joonix »

sliverstorm wrote: post #89
sharkweek wrote: post #78

Earlier quoted context omitted.

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…

I'm not looking forward to it. Flying has already gotten devilishly uncomfortable (my knees run into the seat in front of me) and while I would pay for a little bit more comfort, I can't figure out whether it's just impossible to find such airlines/seats, or if they just don't exist on the trips I make.

Pretty much every airline offers exit row seats for something like $25 more or an "Economy Plus" that's a step up from economy but far from first class.

Re: Starting an Airline

#105

Post by ChuckMcM »

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.

Heh, but do you enslave entire worlds in StarCraft 2? I've found that enterprise is like real time strategy games a little bit, there are a lot of things all at the same time that have to be working well for you to be successful, but if you can put your head in the frame of mind that its just a game (or game like) then you can set aside a big chunk of the tension of doing it for real. The Flying Wallendas (high wire act) would have people walk along a tight rope that was 6" above the ground, and then point out that if you could do that you could walk between buildings, it was just not thinking about the 'bad' things that you weren't planning on having happen anyway.

So at some level when you're spending millions of dollars instead of tens of dollars you're still not planning on losing it, but recognize that if you do it will be a problem. And you are working through a checklist and getting stuff done and correcting for unexpected events. Some folks find that really invigorating, others find it completely paralyzing.

Re: Starting an Airline

#106

Post by joonix »

twistedpair wrote: post #100
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.

Well, Delta did buy a refinery last year. It was a crazy move but I haven't heard much about how it's going since then.

Re: Starting an Airline

#107

Post by kalleboo »

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…

The big question is if there'll be a backlash to the no-services nickel-and-dime-fees style airline business.

I suspect that the U.S. market will continue the race to the bottom, but elsewhere quality will continue to thrive.

Scandinavian Airlines' advertising is currently all about: "luggage: free. card fees: zero, online checkin, assigned seating: free, coffee, newspaper: free, breakfast on board: free, canceling fee: waived within 24 hrs" to capitalize on the passengers who have been burned by picking the cheapest option.

Also meanwhile in Asia, I don't think any of my flight searches have ever turned up Singapore Airlines as the cheapest, yet they're doing amazingly well.

Re: Starting an Airline

#108

Post by mathattack »

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.

High barriers to entry are actually considered a positive for a business. If it's hard to enter, you won't have new competitors casually trying to encroach just because margins look attractive.

Of course the airlines have issues with barriers to exit too, which come with their own problems.

The interesting thing to me is how a vendor is trying to create demand by encouraging the creation of customers. And it's not a new world tech company that's doing this.

Re: Starting an Airline

#110

Post by csomar »

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.

Not really. A new airline just started in my town and there is no need to build an airport or buy planes.

The total startup capital, if I remember was around $3 million and then they raised double that a year later on the stock market.

They are not profitable yet but they are pretty competitive with the old/only airline in the country.

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