How to start an airline on the cheap

The pandemic of 2020 has destroyed many airlines. The loss of demand may be temporary but there is a consensus that there will also be permanent changes to the travel industry. While many of us have less work than we would like there are entrepreneurs who believe that the “new normal” will create new opportunities.

My website provides information about applying for an air operator certificate (AOC) which is required to operate commercial flights. In the months after “lockdown” I’ve received more enquiries about AOC applications than in the preceding 5 years. The business proposals ranged from ad-hoc air taxi to intercontinental long-haul. Each of the promoters believed that the post-pandemic situation will be beneficial for their business model.

The AOC application process requires that a promoter has everything in place before commercial operations can start. This means managers, crew, facilities, contracts and a fleet of aircraft (or at least one). All of this costs money and any delay to the issue of the AOC means that the costs will pile up at a rate of thousands per day while there isn’t any revenue until the AOC is in place and operations start. Promoters can find it difficult to finance this start-up phase, especially if they are proposing an innovative or unproven business model. How can opportunities be tested without putting millions at risk?

I believe that the answer is simple. Instead of building a new operation start the business by leasing-in capacity. There are companies offering ACMI (aircraft, crew, maintenance and insurance) leasing on all types of aircraft. If you lease-in aircraft, then you can start operating almost immediately. You’ll very quickly find out if your proposed business is viable. If it is then you’ll start the process of setting up your own operation and applying for an AOC. If not, then the money you lose is limited to what you have spent on leasing the aircraft and marketing your service. This will be a fraction of the capital at risk if you have aircraft and crew standing idle.

I can’t take credit for coming up with this. It’s the model that’s been adopted by many new operations in the past including EasyJet which, at its peak, had a market capitalisation of over £11bn. Entrepreneurs should have the courage to do something new, but they shouldn’t be afraid to learn from others!