Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Starting an Airline

boeing.com

Post reply on HN
Print view View original

181–190 of 234 posts

Re: Starting an Airline

#181

Post by bulte-rs »

corford wrote: post #155
Shenglong wrote: post #142

Here'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 used to work in the aviation industry and had lots of similar conversations with pilots. After a while I began to realise it's essentially just like every other industry: those the flew for well run airlines tended to be happy and those that didn't weren't. P.S. Professional pilots are known to whinge quite a lot so you might want to take what he said with a little pinch of salt... try lurking on www.pprune.org for…

Sure. There's a lot of whining going on. But aspiring pilots (at least in the EU) basically don't stand a chance. Most Ab-initio's (as they're supposedly called) have student loans in the range of 130-170k and - if they're lucky - en up flying for a low cost carrier.

They get paid per SBH (Scheduled block hour) which lands them - during the first few years, on average - a gross income of €4000. Since most of these pilots are contractors but technically have only one client they'll have to pay for everything themselves (social security, pension, medical insurances, liabilities, income races). Depending on the country your based in this may tax your income by up to 78%.

Not to much to live from, let alone pay for interest on a student loan. And don't even think about repaying that debt.

But like mentioned in earlier comments: flying is like a drug, it's a beautiful job.

Re: Starting an Airline

#182

Post by foobarbazqux »

Shenglong wrote: post #142

Here'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…

> Yet, with dwindling margins and a thriftier consumer base, it's going to take a lot to disrupt this industry.

Although one part of travel is about the physical experience of visiting different places, another major part has to do with connecting people. Here, the real disruption is the internet. I'm not saying flights will ever go away, because we'll always want to move around, but I am saying that we'll feel the need to travel less as connectivity improves.

Re: Starting an Airline

#183

Post by sp332 »

fennecfoxen wrote: post #176
wodow wrote: post #75

Earlier quoted context omitted.

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

Yes it does. A bank needs $1.1 billion to lend $1 billion, or they're out of compliance with Federal Reserve regulations. The interesting part is that once they lend the $1 billion, and it's spent on aircraft (etc) and ends up in the bank accounts of Boeing and its contractors and its employees and the raw materials companies... then there's $1.1 billion in the original bank's accounts and $1 billion in all the Boein…

Well... The bank could start with half a billion, and lend $450,000 of it. Then whichever bank that gets put into could lend 90% of that again, and so on. After a few times, there's a billion dollars lent from half a billion.

Re: Starting an Airline

#184

Post by andyjenn »

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…

The US ExIm bank also provides billions in either direct loans or loan guarantees to foreign companies; this keeps the export market artificially high and effectively subsidises non-US operators and lessors too.

Re: Starting an Airline

#185

Post by beambot »

sp332 wrote: post #183
fennecfoxen wrote: post #176

Earlier quoted context omitted.

Yes it does. A bank needs $1.1 billion to lend $1 billion, or they're out of compliance with Federal Reserve regulations. The interesting part is that once they lend the $1 billion, and it's spent on aircraft (etc) and ends up in the bank accounts of Boeing and its contractors and its employees and the raw materials companies... then there's $1.1 billion in the original bank's accounts and $1 billion in all the Boein…

Well... The bank could start with half a billion, and lend $450,000 of it. Then whichever bank that gets put into could lend 90% of that again, and so on. After a few times, there's a billion dollars lent from half a billion.

I fail to understand your reasoning: 0.5e9 * 0.9^n < 0.5e9 < 1e9. In other words: No one is ever receiving $1B even if banks' balance sheets sum to more than $1B lent collectively. On par, each bank is holding a small part of the 0.5e9, and then the final individual is holding the rest.

Re: Starting an Airline

#186

Post by sp332 »

beambot wrote: post #185
sp332 wrote: post #183

Earlier quoted context omitted.

Well... The bank could start with half a billion, and lend $450,000 of it. Then whichever bank that gets put into could lend 90% of that again, and so on. After a few times, there's a billion dollars lent from half a billion.

I fail to understand your reasoning: 0.5e9 * 0.9^n < 0.5e9 < 1e9. In other words: No one is ever receiving $1B even if banks' balance sheets sum to more than $1B lent collectively. On par, each bank is holding a small part of the 0.5e9, and then the final individual is holding the rest.

But it could be the same, singular bank that the money gets deposited in and loaned from, repeatedly.

Re: Starting an Airline

#187

Post by beambot »

sp332 wrote: post #186
beambot wrote: post #185

Earlier quoted context omitted.

I fail to understand your reasoning: 0.5e9 * 0.9^n < 0.5e9 < 1e9. In other words: No one is ever receiving $1B even if banks' balance sheets sum to more than $1B lent collectively. On par, each bank is holding a small part of the 0.5e9, and then the final individual is holding the rest.

But it could be the same, singular bank that the money gets deposited in and loaned from, repeatedly.

So? If you chain the loans, the bank might have the final balances: ($50M, -$450M) and ($45M, -$405M) and ($405M). The bank's net loan after settling internally is still $500M. Even if spread across banks, the sum of "real" money loaned out is still only $500M. If the loan at the end of the chain defaults, the loss is only $500M net.

Re: Starting an Airline

#188

Post by notahacker »

csomar wrote: post #179
notahacker wrote: post #174

Earlier quoted context omitted.

That $3 million doesn't get you much of an airline without some guarantee of profits on the route you're looking to operate though - leasing a 15 year old 737-800 for a year would use up most of that money before you'd even considered getting it off the ground.

Lately, they leased an Airbus A330 for $30k/day (that is $11m). They are also leasing multiple other planes. I guess it's manageable since they are making money from tickets. I forgot to mention that they enjoy no competition in my town (basically they revived the town small airport) but not much on the rest of the country (being sabotaged by the national airline)

I'm going to infer (mostly from the country code in your profile contact) the airline in question is Syphax.

If the headline figures I've seen are correct, their IPO sold nearly half the company for approx ~$15 million (or about three month's revenue according to their Q2 figures) in working capital.

They have 6 aircraft on order with Airbus which will cost them something in the region of $300 million over the next few years (which they'll probably fund with a sale/leaseback arrangement with an aircraft leasing company because another IPO wouldn't even scratch the surface...)

Those figures give you an indication of why it's easy to get the economics of a startup airline wrong. Imagine Silicon Valley working on those numbers!

Re: Starting an Airline

#189

Post by fleitz »

fennecfoxen wrote: post #176
wodow wrote: post #75

Earlier quoted context omitted.

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

Yes it does. A bank needs $1.1 billion to lend $1 billion, or they're out of compliance with Federal Reserve regulations. The interesting part is that once they lend the $1 billion, and it's spent on aircraft (etc) and ends up in the bank accounts of Boeing and its contractors and its employees and the raw materials companies... then there's $1.1 billion in the original bank's accounts and $1 billion in all the Boein…

This is a huge commonly held misunderstanding of fractional reserve banking.

'The capital ratio is the percentage of a bank's capital to its risk-weighted assets. Weights are defined by risk-sensitivity ratios whose calculation is dictated under the relevant Accord. Basel II requires that the total capital ratio must be no lower than 8%.'

http://en.wikipedia.org/wiki/Capital_requirement

With $1 billion in deposits a bank may lend upto $12 billion under Basel II assuming a risk weight of 1.0

With $1 billion in assets and $12 billion in liabilities the capital ratio is 8%.

Where does the bank get this extra $11 billion? They borrow it from the Federal Reserve, unless they are lending it to another of their accounts in which case they just credit the account.

Re: Starting an Airline

#190

Post by sksksk »

gaius wrote: post #136
peckrob wrote: post #69

Earlier quoted context omitted.

> 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…

I did that a couple of times back in the day. The plane would take off with just enough fuel to get to Ireland, where you would do US immigration while it refuelled, then on to New York, and straight off the plane without any queuing. I think the airline was EOS or Silverjet or something.

BA still do that flight (under their cityjet brand). The real reason why they stop off in Dublin is because the runway at LCY is too short to take off with the weight of a full fuel tank.
Post reply on HN