How to Create an Airline Company

Starting your own airline company is a challenging process requiring vasts amounts of capital.

Launching an airline company is not for the faint of heart. It is a highly capital intensive business subject to strict regulation and the vagaries of fuel prices and the weather. Competition is fierce, with many airlines engaging in price wars by slashing prices and running promotions to lure in travelers. The International Air Transport Associates expects the industry to eek a measly 0.7 percent profit margin in 2011.

Things You'll Need

• Capital
• Airplanes
• Permits

Instructions

1. Conduct market analysis. The first step as an entrepreneur is to analyze the market you are planning to enter. In the case of the airline industry, the key variables are traffic volumes, traffic growth, and airplane requirements by region and route. Several publications publish information on the state of the market, including aircraft manufacturer Boeing's "Current Market Outlook." Using this data, identify the strengths and weaknesses of different regional markets and identify those in which you wish to compete.

2. Develop the business plan. Best business practice calls for a business plan that formalizes your research and charts your company's path. In addition to market analysis, your plan should set forth your strategy for branding, operations, management team, pro forma financial statements, capitalization and risks. Critically, the business plan will provide you with an indication of the number of months or years it will take for your company to break even and turn a profit.

3. Select the airplanes. Whether you are planning to launch a passenger or cargo airline company, plane selection is one of the most important decisions you will make. In the case of passenger aircraft, evaluate the plane's aesthetics, floor plans, cross-sections, flight deck, performance, payload and range and operational costs. Also take into account what fleet your competitors have chosen and whether it is appropriate to emulate or depart from their choices.

4. Source the airplanes. When speaking to suppliers, you will be faced with the choice of leasing versus purchasing the aircraft. Generally speaking, if you do not have the start-up capital or expect to fly your aircraft for a low number of hours, leasing is the economically superior choice. Leasing is also a compelling option to account for seasonal variations in demand or to test new market routes before committing with a costly aircraft purchase.

Tips & Warnings

• Apply for an Air Operator's Certificate (AOC) as early as possible. The certificate ensures that operators meet minimum safety and financial standards and can take up to 18 months to receive.

• Ensure that you have access to vast amounts of capital. A commercial aircraft such as a Boeing 737-600 costs $56.9 million in 2010.

References

• Boeing: Starting an Airline
• CNN: Airline industry profits to plunge in 2011; Aaron Smith
• GlobalPlaneSearch.com: Lease, Charter or Purchase Aircraft?

Resources

• Federal Aviation Administration
• Boeing: Current Market Outlook 2010-2029