As a study in starting an airline, Richard Branson's biography is well worth a read.
Which biography is that? I see a few on Amazon.
Starting an Airline
141–150 of 234 posts
Re: Starting an Airline
#142Here's an investment banker joke I've been hearing oddly often recently: "How do you get a million dollars?" -> "Invest a billion dollars in the airline industry".
On a more serious note: there's a lot of talk on this page about the finance and logistics of starting a company like this - but I think the human factor is also worth mentioning. I fly a moderate amount, and whenever I have an hour or so to spare on a layover, I try to find interesting people to talk at the bar. While I've had varying levels of success, last layover at O'Hare, I spoke to a pilot who had been with a major airline for about a decade.
Having seen "Catch Me If You Can" and surmising that the situation must have changed, I asked him about his job. That was the most dismal response I've received from that question. We talked for about half an hour about how terribly pilots are treated, and how (maybe a bit of an exaggeration) a good number of beginner pilots for airlines are on food stamps because they're paid so poorly. I asked about benefits, and his response was, "just about every benefit you can think of is basically unusable." I asked him why he did it, and he told me that flying was like a drug.
Pilots are responsible for lives, and I'd feel a lot safer if my pilot was paid enough to survive. Yet, with dwindling margins and a thriftier consumer base, it's going to take a lot to disrupt this industry. In reality, I don't see anything major happening without some drastic innovation that cuts associated costs significantly in order to build up that margin.
Re: Starting an Airline
#143Re: Starting an Airline
#144Earlier quoted context omitted.
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.
I think the point is that at a certain level there are only 3 or so defense contractors that have the infrastructure to bid on and win those contracts. Given that they are not "subsidies", but when there are only 2 corporations that are expected to receive the money, then you must call a spade a spade.
If you look at things like the Boeing/Northrop Grumman Tanker contract, then it is hard to fathom that any of the $35B for 180 planes (that's 190M for each plane) wouldn't lead to significant development that could be shared with Boeing's commercial sector.
Re: Starting an Airline
#145It 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.
If it makes you feel better, you can say the same thing about No. 2 pencils. Imagine all of the de-forresting infrastructure, shipping, carbon processing, glue, rubber for the eraser, etc. All of those different experts and workers you have to hire. The money you need for the bulldozers, ships, etc.
That's the power of the modern age :-)
Re: Starting an Airline
#146Earlier 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.
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Re: Starting an Airline
#147Earlier quoted context omitted.
It's funny, because, while I'm not extremely isolated, I have lived through periods of my life when all my family was abroad (I stayed in Uruguay, most emigrated, others studied abroad), and I have few local friends. No amount of telephone calls, chats, Facebook or Skyping can compare to in-person interaction. I have a photo of a recent Christmas, with 3 screens with Skype calls to family in Canada and Europe on each…
But skype does miss eye-contact and picture of half body (to get all hand movements which are important) , and the illusion of being in the same room created by telepresence , and probably had worse latency , and probably other factors i'm not aware of. And we know from the "uncanny valley" that humans are very very sensitive to little things in human/human communication. So it might just be that telepresence offers…
Me too.. especially for remote work, it would be extremely disruptive.
I don't want to move from Uruguay, but a person with similar qualifications in the U.S. makes at least twice as I do.
If telepresence makes it easier for me to work remotely, it would be huge for me.
The telepresence robots are cute and maybe a step in the right direction.
Re: Starting an Airline
#148It 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 must be profitable The airline industry as a whole is not. It's lost about $60 billion since deregulation in 1978.
I've read a report by an insider who claims that the unions negotiate a payout of 97-99% of the projected total profit (or revenue sans some given costs) the airlines make, when it's contract renewal time.
This kind of makes it difficult for the airlines to make anything, especially on the down years that don't match projections, when they end up paying out over 100% (and end up having to borrow money, or get bail outs).
Re: Starting an Airline
#149Earlier 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…
It's precisely where the idea of a corporation comes in. How can a group of people risk so much? The only way is if it fails they don't go to prison or suffer for the rest of their lives because of that failure. Otherwise it would be very hard to convince people to take such enormous risks. The main "problem" with capitalistic business is in expectations. People need to realize that every day comes with risk. And onl…
> And only through that risk do we see reward. But the little guy working the line, he just wants a paycheck with no risk.
This is a bit of pseudo-economics that's popular in the business community nowadays. Risk can be priced, in that it costs money to shift risk to someone else and you can charge a premium for taking on risk yourself. But statements like "only through that risk do we see reward" are just mumbo-jumbo.
Re: Starting an Airline
#150Here's an investment banker joke I've been hearing oddly often recently: "How do you get a million dollars?" -> "Invest a billion dollars in the airline industry". On a more serious note: there's a lot of talk on this page about the finance and logistics of starting a company like this - but I think the human factor is also worth mentioning. I fly a moderate amount, and whenever I have an hour or so to spare on a lay…
I have a friend who's a beginner pilot for a regional airline (American Eagle). He doesn't fly more than 80 hours a month and he only gets paid for the hours he's actually flying, but he has to be on call a lot (sometimes on call in the airport). And yeah, he makes like $20k a year, I think.
He was so upset with the airlines that he quit (also trying to save his marriage). But he loves flying so much that he went back to the same airline, and had to start over again at the bottom of the seniority ladder.
He says that flying is so much fun that he just thinks it's great that he gets paid to do it instead of having to pay to do it, ha. Still, though, he's enrolled in classes again so that he won't have to pay off his student loans because he can't afford the payments.