How to Start an Airline

- The COVID-19 pandemic created an unusual opportunity for new airlines to challenge established competitors. The near-total shutdown forced airlines to reconsider their business models, routes, aircraft fleets, and target customers. Smaller companies potentially gained an opening because established airlines also had to adapt to changed market conditions.

- Industry crises can weaken the advantages of established companies. During normal periods, large airlines benefit from their accumulated networks, resources, and market positions. During a crisis, competitors face new decisions simultaneously, creating opportunities for smaller companies to make better strategic choices.

- Starting an airline is unusually difficult because of its complexity and capital requirements. Unlike many ordinary businesses, a new airline must secure substantial financing, regulatory approval, aircraft, and operational infrastructure before it can carry paying passengers.

- Four major challenges determine whether a startup airline can succeed: choosing a business model, raising capital, securing certification, and acquiring aircraft. Mistakes in any of these areas can prevent an airline from launching or cause it to fail after beginning operations.

- A new airline needs a clear competitive advantage rather than simply copying existing carriers. Its service must offer something materially different, such as lower fares, faster journeys, more convenient connections, or routes that established airlines do not serve.

- Established network airlines enjoy enormous advantages from their international route systems. Carriers such as United Airlines, British Airways, and Singapore Airlines can transport passengers across continents through connecting flights, offering geographic coverage that new entrants cannot realistically replicate at launch.

- Most major full-service airlines were established during the early development of commercial aviation. Their networks expanded alongside the industry, giving them decades to accumulate routes, infrastructure, customers, and operational scale.

- Launching a new full-service global network airline is considered practically impossible without exceptional circumstances. A startup would need enormous resources to match established carriers, while those competitors could use their existing scale to defend their markets before the newcomer became competitive.

- None of the ten largest US airlines had been founded in the 21st century, according to the video's contemporary comparison. In Europe, Wizz Air was the only airline established during that century among the largest carriers examined, and it operated as a low-cost airline rather than a traditional full-service network carrier.

- Virgin Australia was identified as a rare modern example of a major network airline emerging without government support. Its growth was enabled by an unexpected collapse in Australia's airline market rather than by successfully confronting established competitors under ordinary conditions.

- The collapse of Ansett Australia created a major opportunity for Virgin Australia. Ansett had been Australia's other major full-service network airline alongside Qantas. Its failure roughly one year after Virgin Australia's launch left a substantial market gap that Virgin could rapidly fill.

- Virgin Australia's financial collapse in 2020 demonstrated the difficulty of sustaining a new network airline. After entering administration, the company was preparing to emerge as a smaller, predominantly domestic carrier, leaving more of the international market to Qantas.

- Three proposed 2021 airline launches illustrated distinct strategies for entering the industry: FlyPop, Play Airlines, and Breeze Airways. Each intended to serve a market that was underserved or approached differently by established airlines rather than directly copying their international network models.

- FlyPop planned low-cost, long-haul flights between Britain and underserved Indian cities. Its proposed destinations included Amritsar and Ahmedabad, where direct flights from the UK were limited or unavailable on its intended routes.

- FlyPop's main target market was the Indian diaspora living in Britain. By connecting communities directly with cities in India, the airline hoped to attract travelers who otherwise faced connecting flights or less convenient travel arrangements.

- Play Airlines planned to revive the transatlantic connecting model previously used by Wow Air. The Iceland-based strategy involved carrying passengers between Europe and North America at low prices, using Iceland as an intermediate connection point.

- Former Wow Air executives founded Play Airlines. Their previous involvement with the failed carrier gave the startup experience with the same basic operating model, although the earlier airline's closure demonstrated that the strategy carried risks.

- Breeze Airways planned to connect underserved American cities directly rather than relying on traditional hubs. Its proposed approach, described as "hub-busting," targeted city pairs where passengers lacked nonstop service.

- Breeze's proposed routes included Tulsa–New York and Louisville–Los Angeles. These examples illustrated its strategy of offering nonstop journeys that would eliminate the need for passengers to connect through larger airports.

- Breeze had an unusually experienced founder with a record of launching successful airlines. Its founder had previously established WestJet, Azul Airways, and JetBlue, giving the new venture operational credibility and a stronger case for attracting investment.

- Breeze was considered the most promising of the three startup airlines examined. The assessment rested particularly on its founder's history of building airlines and its strategy of serving routes overlooked by established carriers.

- The three startups sought to avoid direct competition with major full-service network airlines. Their business models focused on underserved routes, lower-cost travel, or different customer segments rather than attempting to match the global networks of existing airlines.

- Low-cost airlines can create additional demand rather than simply taking passengers from established competitors. FlyPop and Play intended to attract price-sensitive travelers who might otherwise fly infrequently or avoid traveling because conventional airline fares were too expensive.

- Southwest Airlines was expected to be Breeze's most relevant established competitor. Southwest's domestic network and ability to offer nonstop services positioned it closer to Breeze's proposed market than the large international network carriers.

- Avoiding direct price wars is particularly important for startup airlines. Large airlines have the financial resources to lower prices and absorb temporary losses, while smaller competitors can exhaust their limited capital before establishing themselves.

- Airline profitability was structurally weak even before COVID-19. Over the preceding 25 years, the global airline industry had generally operated with margins of approximately 4–5%, despite substantial investment requirements and exposure to economic shocks.

- Airline profits are especially vulnerable to fuel prices and broader economic conditions. The industry's recurring cycles of profit and loss make returns difficult to predict, reducing its appeal to investors seeking stable performance.

- Railroads were presented as a substantially more profitable investment comparison. The railroad industry was described as producing operating margins of approximately 25–30%, compared with the airline industry's 4–5%.

- Warren Buffett's railroad investments were used to illustrate investors' preference for more dependable transportation businesses. The discussion contrasted his substantial American railroad investments with his historically cautious attitude toward airlines, emphasizing differences in profitability and risk.

- Many airline startups fail before operating their first flight because they cannot raise enough money. Others launch successfully but collapse because their initial funding is insufficient to support expansion and reach a sustainable operating scale.

- Play Airlines secured a $42 million investment from Avianta Capital. The Irish investment fund was managed by Aislinn Whittley-Ryan, who belonged to an influential aviation family that included the founders of Ryanair.

- Play's financing demonstrated the importance of specialized aviation connections. Its principal investment came from a fund managed by someone with established family ties to the airline industry, rather than from a conventional startup investment network.

- FlyPop's largest identified funding source was a British government program. The program supported innovative businesses whose launches had been affected by COVID-19, giving FlyPop access to capital during the pandemic.

- FlyPop's complete investor structure was not publicly clear in the discussion. Although government-backed funding represented its largest identified source, the precise composition of its other investors remained uncertain.

- Breeze Airways raised $83.3 million through venture capital. This represented a more conventional startup financing route than the approaches used by FlyPop and Play.

- Breeze's founder's previous successes likely made its venture capital fundraising possible. Having already launched three major airlines provided a degree of credibility rarely available to aviation entrepreneurs.

- Airline startups lack a consistent, established funding ecosystem. Unlike industries where venture capital firms routinely compete to finance promising businesses, airlines must often assemble financing through unusual combinations of private investors, industry contacts, government support, or other arrangements.

- A good business model and experienced management team do not guarantee airline financing. The scarcity of interested investors means that even credible airline ventures can struggle to obtain the capital needed to complete regulatory and operational preparations.

- Obtaining legal authorization to operate is one of the most expensive stages of launching an airline. Aviation regulators require companies to demonstrate that their aircraft, management, procedures, and safety systems meet commercial operating standards.

- Airlines generally require an Air Operator's Certificate before conducting commercial flights. Each country's aviation regulator has its own certification process, although the underlying requirement is to demonstrate that the airline can operate safely.

- The United States has two principal regulatory categories relevant to the scheduled airline operations discussed: Part 135 and Part 121. Their requirements differ substantially, influencing the aircraft an airline can operate, staffing requirements, certification costs, and operational complexity.

- Part 135 certification is commonly used for charter, private aviation, and cargo operations. It can also support certain scheduled passenger services, generally using aircraft with nine passenger seats or fewer, subject to exceptions.

- Cape Air illustrated how an airline can operate scheduled flights under Part 135 rules. At the time discussed, Cape Air operated a fleet of 94 nine-seat aircraft, primarily serving smaller destinations across the United States and Caribbean, including government-subsidized routes.

- Part 135 rules can permit single-pilot operations in circumstances where Part 121 requires two pilots. Cape Air was legally able to conduct qualifying flights with one pilot, although most of its flights reportedly used two.

- A Part 121 operator such as United Airlines would require two pilots even when operating the same aircraft and route used by a qualifying Part 135 carrier. This illustrated how certification categories can impose different staffing and operating costs on otherwise similar services.

- Part 135 certification was estimated to cost $35,000–$95,000 in legal fees, plus approximately $50,000 in additional expenses. The combined estimated cost was therefore roughly $85,000–$145,000, making it considerably more accessible than Part 121 certification.

- Part 121 certification is required for the large scheduled airline operations discussed. United Airlines, American Airlines, and Delta were cited as examples of carriers operating under this more demanding regulatory framework.

- Part 121 certification is sufficiently complicated that startups generally require specialist consulting assistance. The process involves preparing extensive technical documentation, developing operational systems, and demonstrating compliance with detailed safety requirements.

- Only six FAA-endorsed Part 121 certification consultancies were identified at the time. With only 104 active Part 121 airlines in the United States, new certifications were relatively uncommon, making the consulting market highly specialized.

- One non-FAA-endorsed consultancy advertised a $1.2 million fee for Part 121 certification assistance. The quoted service covered preparation for the application and management of the certification process itself; fees for the FAA-endorsed consultancies were not publicly disclosed.

- Part 121 certification preparation includes developing a comprehensive operations manual. The manual documents how the airline will conduct flights, manage operations, and comply with regulatory requirements.

- Airline management must be trained as part of certification preparation. Establishing management procedures and demonstrating operational competence are necessary before the regulator can approve commercial operations.

- Electronic flight bags must be established as part of the proposed operational infrastructure. These systems form part of the documentation, information, and procedures needed for modern airline operations.

- Drug and alcohol testing programs are another required element of the certification preparation described. They form part of the broader compliance infrastructure that startups must establish before approval.

- The FAA requires extensive evidence that an airline's safety systems and operational procedures are ready. Startups must first build the relevant internal infrastructure and then submit substantial documentation proving they satisfy regulatory requirements.

- Some airline startups attempt to acquire an existing operator's certificate rather than begin certification from scratch. This can offer an alternative route into the market, although transfers remain subject to regulatory approval and other constraints.

- Breeze Airways initially attempted to obtain the certificate of the defunct Compass Airlines. In July, the company applied to the US Department of Transportation for permission to transfer Compass's operating authority to Breeze.

- Other airlines and the Compass Airlines pilots' union opposed Breeze's proposed certificate transfer. This resistance contributed to Breeze abandoning the acquisition strategy.

- Breeze subsequently decided to apply for its own Air Operator's Certificate. The change meant proceeding through the standard certification process rather than acquiring the operating authority of the failed airline.

- Buying an existing certificate was presented as particularly common in the Part 135 market. Entire small airlines are sometimes offered for sale specifically because their operating certificates have value to prospective owners.

- Specialized websites advertise small Part 135 airlines for sale. Acquiring such an airline can provide a buyer with an existing certified operation, although the transaction does not eliminate the need to satisfy regulatory requirements.

- Certification is an important barrier to starting airlines outside the United States as well. National requirements differ, but regulators generally demand evidence of operational and safety competence before allowing a startup to carry passengers commercially.

- Acquiring aircraft is often easier than securing funding or regulatory approval. Although airplanes are extremely expensive, airlines can obtain access to them through financing structures that avoid purchasing aircraft outright.

- Airlines do not necessarily own the aircraft they operate. Leasing and other financing arrangements allow companies to control substantial fleets without bearing the full initial purchase cost.

- Breeze's planned Airbus A220-300 aircraft had a list price of approximately $90 million each. This was roughly equivalent to Breeze's total funding of about $90 million mentioned in the discussion, demonstrating why purchasing aircraft outright would be financially impractical.

- Approximately 50% of commercial aircraft worldwide were operated under lease arrangements. Leasing was presented as particularly attractive to smaller airlines and startups because it reduces initial capital requirements.

- Aircraft leasing spreads acquisition costs over time. Rather than paying the full purchase price at delivery, an airline makes periodic lease payments while using the aircraft to generate revenue.

- Leasing can reduce the need for conventional aircraft-purchase debt. It allows airlines to access aircraft without directly financing their complete acquisition cost, although lease payments remain a continuing financial obligation.

- Leasing can limit the financial risk of owning aircraft that are no longer needed. Lease terms may be shorter than an aircraft's operating life, and some contracts offer options to return aircraft before their scheduled expiration.

- Leasing often provides faster access to aircraft than placing new manufacturer orders. Leasing companies may have aircraft available within weeks or months, while manufacturers frequently operate with delivery backlogs lasting several years.

- Airbus had an order backlog of approximately 7,000 aircraft in December 2020. The backlog meant airlines placing new orders could face long delivery delays, making readily available leased aircraft particularly valuable to new entrants.

- COVID-19 increased the availability of used commercial aircraft. Established airlines reduced their fleets and retired older, less fuel-efficient planes, releasing more aircraft into the market during the industry downturn.

- American Airlines retired 20 Embraer E190 aircraft during its fleet reductions. The retirements contributed to an increase in available aircraft of the type Breeze intended to use for its initial operations.

- Air Canada retired 14 Embraer E190 aircraft. Together with American Airlines' retirements, this increased the supply of E190s in the market and placed downward pressure on their leasing costs.

- Breeze planned to begin operations using Embraer E190 aircraft. It was not directly leasing the particular aircraft retired by American Airlines or Air Canada, but it could benefit from the wider availability and reduced market prices created by those retirements.

- The pandemic created potentially favorable aircraft acquisition conditions for startups. While COVID-19 devastated airline demand, the resulting surplus of aircraft made it easier for new companies to obtain equipment at lower leasing costs.

- Newer aircraft can be financed through sale-and-leaseback agreements. This method is especially useful when an airline wants a recently manufactured aircraft that is not widely available in the secondhand leasing market.

- Breeze placed an order for 60 Airbus A220-300 aircraft. The order represented its planned future fleet development, despite the airline lacking the capital to purchase all 60 planes outright.

- Breeze agreed to sell five of its ordered A220-300 aircraft to Voyager Aviation Holdings before delivery. Voyager would become the owner of those aircraft and lease them back to Breeze.

- The Voyager agreement allowed Breeze to obtain its preferred aircraft without paying their full purchase prices. Breeze could specify and order the aircraft directly from Airbus while using an external company to finance ownership.

- Sale-and-leaseback financing combines manufacturer-order control with the financial advantages of leasing. The airline selects the aircraft and delivery arrangements, while the leasing company supplies the ownership capital and receives continuing rental payments.

- Breeze was expected to arrange further sale-and-leaseback transactions as additional A220 deliveries approached. The first five-aircraft agreement provided a model for financing more of its 60-aircraft order, although further transactions were presented as an expectation rather than confirmed agreements.

- An airline's aircraft financing strategy must match its proposed business model and capital resources. Breeze's combination of leased E190s and future A220 sale-and-leaseback arrangements illustrated how a startup could begin operations with one aircraft type while preparing a newer fleet.

- Aircraft availability and financing conditions can influence the timing of an airline launch. Leasing provides relatively quick access to aircraft, whereas purchasing newly manufactured planes can create delays unrelated to customer demand or regulatory approval.

- Recruitment, office space, marketing, and airport facilities remain necessary parts of launching an airline. Startups must hire employees, establish administrative operations, attract customers, and arrange access to airport infrastructure.

- These other operational tasks were considered less decisive than the four major startup challenges. The discussion argued that weaknesses in business strategy, financing, certification, or aircraft acquisition were more likely to determine eventual failure than routine organizational preparations.

- Successful airline entrepreneurship had become relatively uncommon after the original expansion of low-cost carriers. Established airlines retained strong positions, while the high costs of entry prevented many new competitors from reaching commercial operations.

- The post-pandemic period was presented as a test of whether the airline industry could accommodate another generation of startups. Changes in passenger demand, airline capacity, aircraft availability, and established competitors' strategies created conditions that could potentially alter the industry's competitive structure.

- The central opportunity for new airlines was not to become immediate rivals to the largest global carriers. FlyPop, Play, and Breeze illustrated an alternative approach: identify specific gaps in travel demand, develop a service around those gaps, and avoid expensive direct competition until a viable business has been established.

- The industry's future competitive structure remained uncertain. The three proposed 2021 launches could demonstrate that new entrants still had room to succeed, or show that established airlines' financial resources, networks, and market positions continued to make sustained competition exceptionally difficult.