Do you want to start an airline company? If YES, here is a complete guide to starting an airline company with NO money and no experience.
Okay, so we have provided you an in-depth sample airline company business plan template. We also took it further by analyzing and drafting a sample airline company marketing plan backed up by actionable guerrilla marketing ideas for airline companies. In this article, we will be considering all the requirements for starting an airline company. So put on your entrepreneurial hat and let’s proceed.
Why Start an Airline Company?
First and foremost, an airline is a company that provides air transport services for traveling passengers and freight. They make use of aircraft to supply these services and may form partnerships or alliances with other airlines for codeshare agreements. Businesses in this industry are recognized with an air operating certificate or license issued by a governmental aviation body.
Airlines vary in size, from small domestic airlines to full-service international airlines. Airline services can be categorized as being intercontinental, domestic, regional, or international, and may be operated as scheduled services or charters. The largest airline currently is American Airlines Group.
Starting an airline can be a rough decision, but running a profitable airline is even harder. From start up airlines to established industry leaders, the process involves constant learning and adaptation. Quite a few businesses have a lot of variables and challenges as airlines.
They are capital-intensive and competition is fierce. We believe this business is fossil fuel dependent and often at the mercy of fuel price volatility. Every business process in the industry is labour intensive and subject to government control and political influence.
Many things also depend on the weather. Indeed one of the businesses that a lot of rich folks and big time investors are turning to now and are smiling to the bank with is the airline business. But it would be very crucial to really know what airline business really is and how one may possibly go ahead with kick starting it.
We suggest that you analyse the existing airlines in and outside of your area. Know how many there are as well as know their strengths and weaknesses because it will help you learn from their mistakes and in turn come up with a better and more preferred airline.
Starting an Airline Company – A Complete Guide
- Industry Overview
Reports have shown that the first five years of the twenty-first century have not been a happy or easy time for the world’s airlines. A cyclical downturn which began to be felt by some airlines in 2000, had become a crisis by 2001. Then a series of external events – the attacks in the USA in September 2001, the invasion of Iraq in spring 2003 and the SARS epidemic, followed by escalating fuel prices in 2004 – turned this cyclical downturn into the longest and deepest crisis the airline industry has ever faced.
For some airlines, the crisis turned into disaster. A lot of airlines lost hundreds of millions of US dollars within this period and for some, the accumulated losses came to billions. Many airlines collapsed, while others had to be rescued by their governments.
To some people, the international airline industry appears exciting, dynamic and forward-looking, operating at the frontiers of technological innovation. But only few have been able to understand that despite its glamour, it is an industry whose long-term profitability is both marginal and very cyclical.
Over the last four decades, five to six years of reasonable profits have been followed by two to four years of declining profits, and, in the case of many airlines, of losses. You need to understand that the airline industry is inherently unstable because it is an industry constantly buffeted by new technological developments and constraints – both internal and external.
This was particularly true in the early years of the new millennium. Within this same period, airlines have had to cope not only with many adverse external shocks but also with dynamic and potentially destabilizing internal developments.
Continued liberalization and ‘open skies’, the impact of global alliances, new low cost, no-frills carriers, on-line selling and distribution, and privatization of state owned airlines are just some of the crucial developments that have been impacting on the airline business at a time of continually falling average fares and yields. In other to survive, airlines have had to develop new policies and strategies for the twenty first century.
Starting an Airline Company – Market Feasibility and Research
- Demographics and Psychographics
The percentage and demographics of those who need the services of an airline company is not restricted to people and corporate organizations in your immediate community or state, but it cuts across people and corporate organizations who can afford airline services from all over the world. In this our age, a airline business is a worldwide business hence the leverage to get clients from all across the globe.
We all have heard that airline is the fastest and one of the safest modes of transportation, making it a necessity for an average income earner. When trying to choose a target audience or define the demographics for your airline company, you should make it all encompassing. It should include business oriented people, celebrities, public figures, religious leaders, top government officials, investors and corporate organization within and outside the United States.
List of Niche ideas in the Airline Industry
You need to understand that the airline industry exists in an intensely competitive market. Within the past few years, there has been an industry-wide shakedown, which had far-reaching effects on the industry’s trend towards expanding domestic and international services.
Also over the past few years, the airline industry was at least partly government owned. This is still true in many countries, but in the U.S., all major airlines have come to be privately held. There is a basic need for you to choose your niche in this industry. Apart from niche ideas like medical transportation, freight movement, and airline, the airline industry can be separated into four categories:
- International-: 130+ seat planes that have the ability to take passengers just about anywhere in the world. Companies in this category typically have annual revenue of $1 billion or more.
- National-: Most times these airlines seat 100-150 people and have revenues between $100 million and $1 billion.
- Regional-: Companies with revenue less than $100 million that focus on short-haul flights.
- Cargo-:These are airlines generally transport goods.
Level of Competition in the Airline industry
You need to understand that the airline industry is characterized by intense competition with strong price pressure that brings about a continuous requirement to enhance efficiency. In parallel, this is an industry that continues to grow with more passengers who travel more often.
But since the start of commercial air traffic, the airline industry has been marked by high growth compared to the GNP trend and continuous productivity increases. Experts believe that the industry has been gradually liberalized, which has contributed to new business models, such as low cost carriers (LCCs), arising since the 1990s. Even if a number of new LCCs have contributed to total market growth, existing network airlines have continued to fly with unchanged or slightly rising volumes.
Trends like Technical developments, new business models and efficiency enhancements have helped absorb inflation which, when put together with raised living standards, have helped more people to fly. Average annual traffic growth was 5.8% from 1980 to 2014.
Globally, more than 3 billion passengers are expected to travel with commercial airlines in 2017. Industry experts believe global traffic will rise during the year by slightly more than 6% with capacity to increase by about 5.5%. Industry growth is also expected to continue moving forward and the aircraft manufacturer Airbus forecasts continued healthy annual traffic growth until 2023 of about 5.2% and annual traffic growth of 4.2% from 2023 to 2033.
List of Well known Airline Companies
- Qatar Airways
- Singapore Airlines
- Cathay Pacific Airways
- Turkish Airlines
- Etihad Airways
- ANA All Nippon Airways
- Garuda Indonesia
- Virgin America
- Malaysian airline
We all know that business travellers are important to airlines because they are more likely to travel several times throughout the year and they tend to purchase the upgraded services that have higher margins for the airline. Also leisure travellers are less likely to buy these premium services and are typically very price sensitive.
During times of economic uncertainty or sharp reduction in consumer confidence, you can expect the number of leisure travellers to reduce. Indeed more market share is better for a particular market, but it is also important to stay diversified.
Try to find out the destination to which the majority of airline flights are traveling. One more key area to keep a close eye on is costs. The airline industry is extremely sensitive to costs such as fuel, labour and borrowing costs. If you notice a trend of rising fuel costs, you should factor that into your analysis. Fuel prices tend to fluctuate on a monthly basis, so paying close attention to these costs is crucial.
Starting an Airline Company from Scratch or Buying a Franchise
In this line of business, it will pay you to buy the franchise of a successful airline company/brand as against starting from the scratch. Indeed it can be very expensive buying the franchise of a airline company, but it will definitely pay you in the long run.
But if your desire is to build your own brand, after you must have proved your worth in the aviation industry and other related big-time investment businesses, then you might just want to start your own airline from the scratch.
To be candid, it will pay you in the long run to start your airline company from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.
But you need to know that most of the big and successful airlines around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success and of course you can build your own airline company to become a successful brand with corporate and individual clients from all across the length and breadth of the United States of America and other countries of the world.
Possible Threats and Challenges of Starting an Airline Company
At first glance, you might think that the airline industry is pretty tough to break into, but don’t be fooled. You will need to look at whether there are substantial costs to access bank loans and credit. This is because if borrowing is cheap, then the likelihood of more airliners entering the industry is higher. We believe that the more new airlines that enter the market, the more saturated it becomes for everyone.
Things like brand name recognition and frequent fliers point also play a role in the airline industry. An airline with a strong brand name and incentives can often lure a customer even if its prices are higher. Possible challenges of starting this business may include:
- Power of suppliers
- Power of buyers
- Availability of substitutes
- Competitive rivalry
Starting an Airline Company – The Legal Aspect
- Best Legal Entity for your airline company
When planning to start up an airline company, the legal entity you choose will go a long way to decide how big your business can grow; a lot of airline companies design their businesses and services for regional/community market, some for national market, while others for international market. But remember that you can either choose a general partnership or limited liability Company for an airline company.
On a common ground, general partnership should have been the ideal business structure for a small scale airline company especially if you are just starting out with a moderate start-up capital. But individuals in the business world prefer limited liability Company for obvious reasons, which is why if your intention is to grow the business and have clients from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you.
It is important to state that forming your business as an LLC protects you from personal liability. In a situation where things go wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need board of directors, shareholders meetings and other managerial formalities.
If you take your time to critically study the various legal entities to use for your airline company, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Catchy Business Name ideas for an Airline Company
- Air whale
- Magical Airways
- Dove lines
- Air castle
- Milky way
- Eagle sight
Insurance for a very long time has always been the back bone of any money making industry. In this line of business, there is a key word called aviation insurance. Aviation insurance is insurance coverage reserved specifically to the management of aircraft and the risks involved in aviation.
Aviation insurance policies are distinctly different from those for other areas of transportation and it incorporates aviation terminology, as well as limits and clauses specific to aviation insurance. This insurance is a must get when planning to start an airline. Types of aviation insurance may include:
- Public liability insurance
- Passenger liability insurance
- Ground risk hull insurance not in motion
- Combine single limit
- In-flight insurance
- Ground risk hull insurance in motion (taxing)
Intellectual Property Protection
When starting your own airline company, usually you may not have any need to file for intellectual property protection/trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But as a focused entrepreneur and someone who wants to protect the company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO.
Is Professional Certification Needed to Run an Airline Company?
You need to understand that professional certification in this industry is one of the main reasons why most airline companies stand out. If you want to make a strong impact in the airline industry, you should work towards acquiring all the needed certifications in your area of specialization.
We suggest you pursue professional certifications; it will go a long way to show your commitment towards the business. These are some of the certifications you can work towards achieving if you want to run your own airline company;
- 14 CFR Part 121 Air Carrier Certification
- Aviation Management Professional (AvMP)
- NBAA’s Certified Aviation Manager (CAM)
- 14 CFR Part 135 Air Carrier and Operator Certification
- IATA aviation certification
Legal Documents Needed to Run an Airline Company
The importance of proper documentation before launching a business in the United States of America cannot be looked over especially a business like airline company. It is illegal to run any business in the United States without the proper documentations.
If you do, it won’t be too long before the long arm of the law catches up with you. These are some of the basic legal documents that you are expected to have in place if you want to legally run your own airline company in the United States of America;
- Certificate of Incorporation
- Business License and Certification
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Consulting contract documents
- Apostille (for those who intend operating beyond the United States of America)
- Company Bylaws
- Insurance Policy
- Memorandum of Understanding (MoU)
Financing your Airline Company
This business is indeed capital intensive, which is why entrepreneurs willing to start the business need to make sure they raise the needed start-up capital from all available legal means. When it comes to financing a business, one of the first things and perhaps the major factor that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labour yourself before convincing your bank, investors and your friends to invest in your business.
- Getting money from personal savings and sale of personal stocks and properties
- Getting money from investors and business partners
- Sell of shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
Choosing a Suitable Location for your Starting an Airline Company
Choosing a location for your airline company can be in two phases. Firstly it must be located in a city that has an airport and you are expected to pay for parking space in the airport (hanger). So also, you are expected to secure an administrative office in a visible and busy location. The place you choose will have great influence on the success of your business.
If you have taken your time to study the airline industry, you will realize that airline companies are willing to pay expensive rents in order to stay in a busy airport; a place where business activities and financial activities are at its peak.
So when making this very crucial decision, make sure that it is a place that is located in a business district in your city, a place that is visible and easily accessible. Of course, you would not want to locate this type of business in the outskirts of town. Your clients should be able to drive down and locate your office with little or no difficulty.
Starting an Airline Company – Technical and Manpower Requirements
Airport capacity, route structures, technology and costs to lease or buy the physical aircraft are significant in the airline industry. Other large issues in this business are:
We all know that weather is variable and unpredictable. Extreme heat, cold, fog and snow can shut down airports and cancel flights, which costs an airline money.
- Fuel Cost
Experts believe that fuel is an airline’s second largest expense. Fuel makes up a significant portion of an airline’s total costs, although efficiency among different carriers can vary widely. Short haul airlines typically have lower fuel efficiency because take-offs and landings consume high amounts of jet fuel.
Indeed labour is the airline’s No.1 cost; airlines must pay pilots, flight attendants, baggage handlers, dispatchers, customer service and others. Airlines follow a corporate structure where each broad area of operation (such as maintenance, flight operations (including flight safety), and passenger service) is supervised by a vice president. Larger airlines often appoint vice presidents to oversee each of the airline’s hubs as well. Airlines employ lawyers to deal with regulatory procedures and other administrative tasks. The various types of airline personnel include:
- Flight operations personnel including flight safety personnel.
- Pilots (Captain and First Officer: some older aircraft also required a Flight Engineer and/or a Navigator)
- Flight attendants (led by a purser on larger aircraft)
- In-flight security personnel on some airlines
- Aerospace and avionics engineers responsible for certifying the aircraft for flight and management of aircraft maintenance
- Aerospace engineers, responsible for airframe, power plant and electrical systems maintenance
- Avionics engineers responsible for avionics and instruments maintenance
- Airframe and power plant technicians
- Electric System technicians, responsible for maintenance of electrical systems
- Avionics technicians, responsible for maintenance of avionics
- Flight dispatchers
- Baggage handlers
- Ramp Agents
- Gate agents
- Ticket agents
- Passenger service agents (such as airline lounge employees)
- Reservation agents, usually (but not always) at facilities outside the airport
- Crew schedulers
The Service Process Involved in Running an Airline
You need to know that airlines also make money from transporting cargo, selling frequent flier miles to other companies and up-selling in-flight services. But the largest proportion of revenue is derived from regular and business passengers. This is why it is important that you take consumer and business confidence into account on top of the regular factors that one should consider like earnings, growth and debt load.
Businesses in this industry assign prices to their services in an attempt to maximize profitability. The pricing of airline tickets has become increasingly complicated over the years and is now largely determined by computerized yield management systems.
Due to the complications in scheduling flights and maintaining profitability, airlines have many loopholes that can be used by the knowledgeable traveler. A lot of these airfare secrets are becoming more and more known to the general public, so airlines are forced to make constant adjustments.
Also full-service airlines have a high level of fixed and operating costs to build and maintain air services: labour, fuel, airplanes, engines, spares and parts, IT services and networks, airport equipment, airport handling services, sales distribution, catering, training, aviation insurance and other costs. Thus, all but a small percentage of the income from ticket sales is paid out to a large variety of external providers or internal cost centres.
Also have it in mind that fuel hedging is a contractual tool used by transportation companies like airlines to reduce their exposure to volatile and potentially rising fuel costs. A lot of low cost carriers have adopted this practice. We all know that airlines often have a strong seasonality, with traffic low in Winter and peaking in Summer.
For instance, in Europe the most extreme market are the Greek islands with July/August having more than ten times the winter traffic, as Jet2 is the most seasonal among Low cost carriers with July having seven times the January traffic, whereas legacy carriers are much less with only 85/115% variability.
Starting an Airline Company – The Marketing Plan
- Marketing Strategies for an Airline Company
Just like we have stated already, the airline industry is very competitive, with companies offering very similar products striving for business from the same customers. This is why airlines have gotten creative with their marketing strategies to generate buzz and attract customer attention.
- Making use of Social Media
A lot of airlines connect with customers on social media, striving to deepen the relationship by humanizing the brand. Airlines use social media accounts in a variety of ways, including providing customer service, offering updates on sales and promotions, and giving customers a fun glance at what goes on behind-the-scenes.
- Direct Advertising
A lot of airlines are working their way into the daily lives of customers with non-traditional advertising methods. Knowing or making use of this strategy work to further develop the brand. Instead of simply limiting marketing efforts to frequent flyers, you can reach the public at large, building a favorable brand image with people who may not already have a preferred airline.
- Business Loyalty Programs
Loyalty programs in this line of business encourage flyers to book repeat flights with the same company. A lot of airlines charge similar fares for identical trips, so this is a way to gain an advantage. You can start by making sure that when a customer earns a certain number of points or reaches a specific tier status, he becomes eligible for perks like free flights, seat upgrades, passes to airport lounges, complimentary Wi-Fi, alcoholic beverages at no charge, discounted parking and more.
- Unique Flight Perks
Note that a lot of airlines have gained customer advantage by marketing an entertaining in-flight experience. This includes features like in-seat entertainment systems programmed with current television shows, movies, music and games. Airline companies incorporate these perks into their marketing strategies, wooing a customer to choose the airline the next time he flies.
Strategies to Boost your Airline Brand Awareness and Creating a Corporate identity
Boosting the brand awareness of an airline is a fairly easy concept. You have to know a destination product that people want. This will set you apart in your industry because you provide one of the fastest forms of commercial travel in the world today.
The only thing that you need to do as an airline is to set yourself apart from competing airlines who want the same customers you have. In order to do that, you have to have a marketing strategy that fits your dreams and ideas. Things to consider may include:
- Position your market
- Distinguish your brand
- Be Competitive About Loyalty
- Good pricing strategy
- Be direct and creative
- Create an image
- Promote a community
- Be consistent