How to start an airline on the cheap

The pandemic of 2020 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, some entrepreneurs 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 received more enquiries about AOC applications than in the preceding five years. The business proposals ranged from ad-hoc air taxi to intercontinental long-haul. Each of the promoters believed that the post-pandemic situation would benefit their business model.

The AOC application process requires that a promoter has everything in place before commercial operations start. This means managers, crew, facilities, contracts and a fleet of aircraft (or at least one). All of this costs money. Any delay to the issue of the AOC means that costs pile up at a rate of thousands per day with no revenue. Promoters can find it difficult to finance this start-up phase, especially if they propose 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 aircraft types. If you charter aircraft from one of these companies, you can start operating almost immediately. You'll very quickly find out if your proposed business is viable. If it is, then you'll begin the process of setting up your operation and applying for an AOC. If not, the money you lose is limited to what you have spent on leasing the aircraft and marketing your service. This would be a fraction of the capital at risk if you were financing aircraft and crew standing idle.

If you intend to operate flights within the European Union (EU), you can lease your aircraft from any EU operator. In other parts of the world, you'll probably need to charter from an operator based in the country where you intend to set up your AOC.

I can't take credit for coming up with this idea. It's the model 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!

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