airlines business plan pdf

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Airline Business Plan

Launching an airline is challenging. Even harder is running it successfully. Starting with a new airline business and progressing to established market players requires ongoing learning and adaptability.

Anyone can start a new business, but you need a detailed business plan when it comes to raising funding, applying for loans, and scaling it like a pro!

Need help writing a business plan for your airline business? You’re at the right place. Our airline business plan template will help you get started.

Free Business Plan Template

Download our free business plan template now and pave the way to success. Let’s turn your vision into an actionable strategy!

• Fill in the blanks – Outline
• Financial Tables

How to Write An Airline Business Plan?

Writing an airline business plan is a crucial step toward the success of your business. Here are the key steps to consider when writing a business plan:

1. Executive Summary

An executive summary is the first section planned to offer an overview of the entire business plan. However, it is written after the entire business plan is ready and summarizes each section of your plan.

Here are a few key components to include in your executive summary:

Introduce your Business:

Start your executive summary by briefly introducing your business to your readers.

Market Opportunity:

Airline services:.

Highlight the airline services you offer your clients. The USPs and differentiators you offer are always a plus.

Marketing & Sales Strategies:

Financial highlights:, call to action:.

Ensure your executive summary is clear, concise, easy to understand, and jargon-free.

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2. Business Overview

The business overview section of your business plan offers detailed information about your company. The details you add will depend on how important they are to your business. Yet, business name, location, business history, and future goals are some of the foundational elements you must consider adding to this section:

Business Description:

Describe your business in this section by providing all the basic information:

Describe what kind of airline company you run and the name of it. You may specialize in one of the following airline businesses:

• Full-service carriers
• Low-cost carriers
• Regional airlines
• Charter airlines
• Cargo airlines
• Describe the legal structure of your airline company, whether it is a sole proprietorship, LLC, partnership, or others.
• Explain where your business is located and why you selected the place.

Mission Statement:

Business history:.

If you’re an established airline service provider, briefly describe your business history, like—when it was founded, how it evolved over time, etc.

Future Goals

This section should provide a thorough understanding of your business, its history, and its future plans. Keep this section engaging, precise, and to the point.

3. Market Analysis

The market analysis section of your business plan should offer a thorough understanding of the industry with the target market, competitors, and growth opportunities. You should include the following components in this section.

Target market:

Start this section by describing your target market. Define your ideal customer and explain what types of services they prefer. Creating a buyer persona will help you easily define your target market to your readers.

Market size and growth potential:

Describe your market size and growth potential and whether you will target a niche or a much broader market.

Competitive Analysis:

Market trends:.

Analyze emerging trends in the industry, such as technology disruptions, changes in customer behavior or preferences, etc. Explain how your business will cope with all the trends.

Regulatory Environment:

Here are a few tips for writing the market analysis section of your airline business plan:

• Conduct market research, industry reports, and surveys to gather data.
• Provide specific and detailed information whenever possible.
• Illustrate your points with charts and graphs.
• Write your business plan keeping your target audience in mind.

4. Airline Services

The product and services section should describe the specific services and products that will be offered to customers. To write this section should include the following:

Describe your services:

Mention the airline services your business will offer. This list may include services like,

• Passenger flight
• Baggage handling
• In-flight services
• Seating options
• Loyalty programs
• Special assistance

Quality measures

: This section should explain how you maintain quality standards and consistently provide the highest quality service.

Additional Services

In short, this section of your airline plan must be informative, precise, and client-focused. By providing a clear and compelling description of your offerings, you can help potential investors and readers understand the value of your business.

5. Sales And Marketing Strategies

Writing the sales and marketing strategies section means a list of strategies you will use to attract and retain your clients. Here are some key elements to include in your sales & marketing plan:

Unique Selling Proposition (USP):

Define your business’s USPs depending on the market you serve, the equipment you use, and your unique services. Identifying USPs will help you plan your marketing strategies.

Pricing Strategy:

Marketing strategies:, sales strategies:, customer retention:.

Overall, this section of your airline company business plan should focus on customer acquisition and retention.

Have a specific, realistic, and data-driven approach while planning sales and marketing strategies for your airline business, and be prepared to adapt or make strategic changes in your strategies based on feedback and results.

6. Operations Plan

The operations plan section of your business plan should outline the processes and procedures involved in your business operations, such as staffing requirements and operational processes. Here are a few components to add to your operations plan:

Staffing & Training:

Operational process:, equipment & software:.

Include the list of equipment and software required for the airline, such as aircraft, baggage handling systems, flight operations systems, revenue management systems, etc.

Adding these components to your operations plan will help you lay out your business operations, which will eventually help you manage your business effectively.

7. Management Team

The management team section provides an overview of your airline business’s management team. This section should provide a detailed description of each manager’s experience and qualifications, as well as their responsibilities and roles.

Founders/CEO:

Key managers:.

Introduce your management and key members of your team, and explain their roles and responsibilities.

Organizational structure:

Compensation plan:, advisors/consultants:.

Mentioning advisors or consultants in your business plans adds credibility to your business idea.

This section should describe the key personnel for your airline business, highlighting how you have the perfect team to succeed.

8. Financial Plan

Your financial plan section should summarize your business’s financial projections for the first few years. Here are some key elements to include in your financial plan:

Profit & loss statement:

Cash flow statement:, balance sheet:, break-even point:.

Determine and mention your business’s break-even point—the point at which your business costs and revenue will be equal.

Financing Needs:

Be realistic with your financial projections, and make sure you offer relevant information and evidence to support your estimates.

9. Appendix

The appendix section of your plan should include any additional information supporting your business plan’s main content, such as market research, legal documentation, financial statements, and other relevant information.

• Add a table of contents for the appendix section to help readers easily find specific information or sections.
• In addition to your financial statements, provide additional financial documents like tax returns, a list of assets within the business, credit history, and more. These statements must be the latest and offer financial projections for at least the first three or five years of business operations.
• Provide data derived from market research, including stats about the industry, user demographics, and industry trends.
• Include any legal documents such as permits, licenses, and contracts.
• Include any additional documentation related to your business plan, such as product brochures, marketing materials, operational procedures, etc.

Use clear headings and labels for each section of the appendix so that readers can easily find the necessary information.

Remember, the appendix section of your airline business plan should only include relevant and important information supporting your plan’s main content.

The Quickest Way to turn a Business Idea into a Business Plan

Fill-in-the-blanks and automatic financials make it easy.

This sample airline business plan will provide an idea for writing a successful airline plan, including all the essential components of your business.

After this, if you still need clarification about writing an investment-ready business plan to impress your audience, download our airline business plan pdf .

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Frequently asked questions, why do you need an airline business plan.

A business plan is an essential tool for anyone looking to start or run a successful airline business. It helps to get clarity in your business, secures funding, and identifies potential challenges while starting and growing your business.

Overall, a well-written plan can help you make informed decisions, which can contribute to the long-term success of your airline company.

How to get funding for your airline business?

There are several ways to get funding for your airline business, but self-funding is one of the most efficient and speedy funding options. Other options for funding are:

• Bank loan – You may apply for a loan in government or private banks.
• Small Business Administration (SBA) loan – SBA loans and schemes are available at affordable interest rates, so check the eligibility criteria before applying for it.
• Crowdfunding – The process of supporting a project or business by getting a lot of people to invest in your business, usually online.
• Angel investors – Getting funds from angel investors is one of the most sought startup options.

Apart from all these options, there are small business grants available, check for the same in your location and you can apply for it.

Where to find business plan writers for your airline business?

There are many business plan writers available, but no one knows your business and ideas better than you, so we recommend you write your airline business plan and outline your vision as you have in your mind.

What is the easiest way to write your airline business plan?

A lot of research is necessary for writing a business plan, but you can write your plan most efficiently with the help of any airline business plan example and edit it as per your need. You can also quickly finish your plan in just a few hours or less with the help of our business plan software .

How do I write a good market analysis in an airline business plan?

Market analysis is one of the key components of your business plan that requires deep research and a thorough understanding of your industry. We can categorize the process of writing a good market analysis section into the following steps:

• Stating the objective of your market analysis—e.g., investor funding.
• Industry study—market size, growth potential, market trends, etc.
• Identifying target market—based on user behavior and demographics.
• Analyzing direct and indirect competitors.
• Calculating market share—understanding TAM, SAM, and SOM.
• Knowing regulations and restrictions
• Organizing data and writing the first draft.

Writing a marketing analysis section can be overwhelming, but using ChatGPT for market research can make things easier.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Airline Business Plan Sample

Published Feb.01, 2021

Updated Apr.19, 2024

By: Jakub Babkins

Average rating 4.8 / 5. Vote count: 6

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Table of Content

Do you want to start an airline company?

An airline business provides air transport to passengers on a national and international level. The business is undoubtedly much more profitable than other usual businesses. However, it comes at the cost of a difficult startup.

Starting an airline business is an inevitably expensive venture. The costs of jets, the salaries of qualified and experienced pilots, salaries of the crew, charges paid to the airport, payments to government and travel agents combined make a huge cost.

Therefore, if you are exploring how to build an airline business plan, you must first make sure that you will be able to manage a large team and expenses. To start this business, the first step would be creating a business plan. In this blog, we’re providing a business plan for airlines written for the startup, Bruce Airlines.

Executive Summary

2.1 the business.

Bruce Airlines will be a registered and licensed aviation business startup headquartered in Charlotte. The business will be owned by Bruce Greg, former COO of Aer Lingus.

2.2 Management of Airline company

Managing an airline company demands a lot of experience and expertise. Because the slightest mistake of anyone can lead to huge money and even life losses. In this airline business plan executive summary pdf we’ll be providing all details about Bruce Airlines. So you would have complete knowledge of what to include in your starting up airline business plan.

To manage an airline company, you’ll be needed to employ aviation attorneys, schedule coordinators, aviation technicians, flight attendants, pilots, and administrative staff.

To ensure the smooth running of business’ operations, Bruce Airlines will offer just 45 destinations across the globe in the initial phase.

2.3 Customers of Airline company

The customers of our airline will mainly be businesspersons and officers who need to travel internationally. Moreover, the general public and tourists will also be our target customers.

2.4 Business Target

Our target is to cover the startup expenses within two years of the launch. Moreover, we also aim at earning a net profit margin of $27k per month by the end of the second year and $49k per month by the end of the third year.

Company Summary

3.1 company owner.

Bruce Greg completed his pilot training at American Airlines Cadet Academy at the age of 21. After that, he did an MBA from Harvard University and joined Aer Lingus as a company manager. He served at several managerial posts and eventually became the company’s, Chief Operating Officer. He served as COO for six years and then decided to launch his own airline.

3.2 Why the airline company is being started

Bruce has always been associated with the airline business. He decided to launch his own airline to be an entrepreneur and earn the most by utilizing his skills and experience.

3.3 How the airline company will be started

Step1: Creating A Business Plan

The first step before starting an airline company is to create a business plan for airlines company. Bruce studied several examples of business plans for airlines and developed his start an airline business plan himself. We are providing the business plan he created in this sample business plan airline company.

Step2: Acquiring Required Licenses & Permits

Step3: Establish Headquarter, Values & Services

Bruce Airlines will be headquartered in Charlotte. The company will come into contact with airports and the government to negotiate the fee for hangars and for scheduling flights and routes. Meanwhile, the company will define its services, values, and customer care policies to get recognized.

Step4: Hire The Staff

To run an airline company, you need to hire a large staff. Due to the responsible and delicate nature of work, Bruce decided to recruit staff after rigorous testing and interviewing. The list of staff he’ll hire will be given in the upcoming sections along with their job descriptions and salaries.

Step5: Promote & Market

To attract customers amid huge competition, it is essential to develop an effective marketing strategy. And to come in contact with stakeholders who can indirectly promote your company.

Step6: Establish Online Presence

In this era, it is really important to establish a strong website presence. Bruce decided to launch a website that provides electronic ticketing and flight booking system to facilitate his customers.

Like all other airlines, Bruce Airlines will also be offering four travel classes. The services and luxuries associated with each class are listed here. If you want to build your own airline you can take help from this business plan template airlines.

• Economy Travel Class: This will be our basic class consisting of normal quality seats, foods, and extras for those looking for economical travel. The leg space, seat width, and screen size will be a lot lesser than all other classes. However, it will be adequate for a short flight.
• Wider and Comfortable Seats
• Quality foods and refreshments
• 16-inch entertainment screen
• Extra things including hot towels, toothbrushes, headsets, etc.
• Extra Comfortable Seats (More width, inclination)
• High-quality foods and refreshments
• 20-inch entertaining screen
• Extra things including eye masks, headsets, towels, and others.
• High priority check-in security
• High priority baggage handling
• Mini-Suites with privacy doors and noise-dampening curtains
• Storage compartments
• 26-inch entertainment screen
• Personal wardrobe
• Comfortable seat that reclines into super-comfy bedding with temperature control
• Finest foods and drinks made by world-renowned chefs
• Amenity kit including toothbrushes, face creams, lip balms, ear-plugs, and other things.

Marketing Analysis of Airline Company

Marketing analysis is a very important part of airlines business plan template. It analyzes the target market and target customers. Moreover, it also explains how much price you should set to meet your financial goals while attracting more customers than your competitors.

In this starting an airline business plan we are providing the marketing analysis done for Bruce Airlines. Here we have analyzed the global market trends for this business and the general groups of people that can be considered as potential customers.

If you are looking for how to write a business plan for an airline you can take help from airline business models pdf.

5.1 Market Trends

According to IBISWorld, more than 22k global airline businesses are running in the United States, employing more than 2.5 million masses. According to the same source, the business holds a huge market size of $686 billion.

Despite that the industry is already quite large, still, It is expected to grow more in the coming years. The growth is forecasted based on the surge in travel activities and expansion in the middle-class population in the coming years.

5.2 Marketing Segmentation

5.2.1 Business Persons

This group of our customers comprises of businessmen and women who need to travel to several countries as part of their business. This group is expected to avail of our first class and business class travel tickets. As this category usually arrange business trips and meetings, therefore, we expect this group to avail our services in groups.

5.2.2 Foreign Officers

Our second target group comprises high officials who need to travel on regular basis to meet their job responsibilities. This group is also expected to avail of our first class and business class travel tickets.

5.2.3 Tourists

Our third target group will comprise tourists who board airplanes frequently to reach out to remote locations. This category is expected to travel mostly in economy and premium economy class.

5.2.4 General Public

Lastly, general people who have to travel far-off places on an urgent basis will also be our target customers. This group is expected to avail mostly our economy class service.

5.3 Business Target

• To earn a profit margin of $49k per month by the end of the third year
• To achieve an average rating above 4.77 by the end of the second year
• To achieve a CSAT score above 92 by the end of the first six months
• To increase our travel destinations from 45 to 55 within three years of our launch

5.4 Product Pricing

Our prices will lie within the same ranges as that of our competitors. However, we will offer several discounts in the startup phase.

Marketing Strategy

Bruce Airlines will come up with several competitive aspects to get ahead of its competitors. In this airline marketing strategy pdf we’re providing the marketing strategy of Bruce Airlines. So that you can have help in making your own airline marketing business plan.

6.1 Competitive Analysis

We expect to get popularity among our customers due to the following competitive aspects.

• Electronic booking and ticketing facility
• Additional amenities
• Discounted rates in the first two months
• Dedicated flight attendants
• Highly customer care oriented policies

6.2 Sales Strategy

To advertise our startup, we’ll

• Promote our services through travel agent companies , social media campaigns, and Google Local ads services.
• Offer a 30% discount on the economy, premium economy, and business class tickets for the first two months of our launch.
• By launching our frequent-flyer program for privileged and loyal customers.
• By making our website SEO and by investing in artificially intelligent chatbots.

6.3 Sales Monthly

6.4 Sales Yearly

6.5 Sales Forecast

Personnel plan

An airline company needs a lot of staff to manage operations. Therefore you should make a detailed list of required employees with their job descriptions as you write a business plan for an airline.

7.1 Company Staff

Bruce will be the CEO himself. The staff he’ll hire is listed below:

• 1 Chief Operating Officer
• 5 Pilots with ATP certifications
• 9 Flight Attendants
• 2 Airline Operations Agents
• 3 Avionics Technicians
• 3 Airline Station Agents
• 1 Aviation Attorney
• 2 Sales Executives
• 1 Social Media Manager
• 6 Security Officers
• General Cabin Crew

7.2 Average Salary of Employees

Financial plan.

The airline company is not like other usual businesses. Starting and running an airline business is extremely expensive due to the high costs involved in

• Purchasing Airplanes
• Recruiting highly qualified pilots
• The fee paid to the government and airports
• The fee paid to travel agents
• Frequent loss due to empty seats
• Salaries of a large workforce
• Maintenance costs
• Money spent on marketing and advertisement

Therefore due to the high costs involved in airline operations, you need to be very much careful in managing your finances. Your financial plan for this business must draw a trajectory to earn targeted profits despite these huge expenses.

As Bruce had all the knowledge to create a financial plan, he carried out this task himself. In the case of your startup, if you are not a professional financial analyst, you must hire the services of one. To get a rough idea of what to expect from your professional financial plan writer , we are providing the financial plan of Bruce Airlines in this starting airline company business plan.

8.1 Important Assumptions

8.2 break-even analysis.

8.3 Projected Profit and Loss

8.3.1 profit monthly.

8.3.2 Profit Yearly

8.3.3 Gross Margin Monthly

8.3.4 Gross Margin Yearly

8.4 Projected Cash Flow

8.5 Projected Balance Sheet

8.6 business ratios.

All tables in PDF Download Airline Business Plan Sample in pdf Professional OGS capital writers specialized also in themes such as drop shipping business plan , import and export business plan , logistics business plan , airmall business plan and helicopter business plan .

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Airline Business Plan: Writing Effective Airline Business Plans

To write a successful airline business plan , you must take several important trends in the airline industry and broader economy into account. What affect will these important trends have on the new airline?

• Continuing volatility in oil and other commodity markets
• A decline in personal disposable income as the economy slows
• Anxiety over flying and travel restrictions as a result of terrorist attacks and war
• Recent financial hardships and bankruptcies of major airline companies

Important Airline Business Plan Questions to Answer

To write a convincing aviation business plan and successfully launch your new airline, you must have confident answers to the following questions:

• What is the market demand for your new airline business?
• How will you prove the feasibility of your new airline?
• What kind of financing will you need, and how much?
• What types of investors will you seek capital from?
• What relevant past experience does your management team have, which you can leverage in your business plan?
• What strategic partnerships will you forge?
• What is your marketing plan and how will you grow your airline’s customer base?
• What are your airline’s future financial projections?
• What is your new airline’s “unfair competitive advantage” and how will you create barriers to entry?

How to Finish Your Airline Business Plan in 1 Day!

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With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your business plan today.

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Airline Business Plan FAQs

What is the easiest way to complete my airline business plan.

Growthink's Ultimate Business Plan Template allows you to quickly and easily complete your Airline Business Plan.

What is the Goal of a Business Plan's Executive Summary?

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of airline you are operating and the status; for example, are you a startup, do you have an airline that you would like to grow, or are you operating a chain of airlines?

Other Helpful Business Plan Articles & Templates

How to Create an Airline Business Plan

Blog > how to create an airline business plan, table of content, introduction, executive summary, market analysis, business description, business structure and organization, marketing and sales strategy, fleet and operations, financial projections, funding and investment, risk analysis and mitigation, regulatory and legal compliance, sustainability and environmental, our other categories.

• Company Valuation
• Pitch Deck Essentials
• Raising Capital
• Startup Guide
• Uncategorized

Reading Time : 14 Min

Business plan 101.

The airline industry has experienced exponential growth and transformative changes over the years, making it an attractive sector for entrepreneurs seeking to launch their own airlines. However, navigating this competitive landscape requires a well-crafted and comprehensive airline business plan. In this guide, we will walk you through the essential steps and key components of creating an effective airline business plan that will lay the foundation for your success in the aviation industry. As a trusted startup consultant service provider, Stellar Business Plans is here to support you in turning your aviation dreams into reality.

An executive summary serves as the snapshot of your entire airline business plan . It succinctly outlines your airline’s vision, goals, financial projections, and growth strategies. This section sets the tone for the rest of the plan, capturing the attention of potential investors and stakeholders.

Example: “Skyline Airways is a visionary airline committed to redefining air travel by providing unparalleled luxury and convenience to business and leisure travelers. Our strategic expansion plans and commitment to customer satisfaction make us a strong contender in the aviation industry. This executive summary outlines the key components of our business plan, showcasing the promising potential of Skyline Airways.”

Stellar Business Tip: Keep your executive summary concise yet impactful. Highlight the unique selling points of your airline and emphasize how it addresses the pain points of customers.

Understanding the dynamics of the airline industry is crucial for making informed decisions. Conduct an in-depth market analysis, including market trends, target customer segments, and competitor landscape. Utilize relevant statistics and data to present a comprehensive overview.

Example: “The global airline industry is projected to witness substantial growth in the coming years, driven by increasing disposable incomes, growing tourism, and expanding business travel. According to the International Air Transport Association (IATA), global air passenger numbers are expected to double in the next two decades, reaching 8.2 billion by 2037.”

Stellar Business Tip: Leverage market research and industry reports to substantiate your claims. Show that your airline’s strategies are well-aligned with market opportunities.

This section delves into the core aspects of your airline, including your mission, unique selling proposition (USP), and the services you will offer. Introduce your airline’s history and highlight significant milestones that demonstrate your readiness for success.

Example: “FlyRight Airlines was founded with a vision to revolutionize the travel experience for passengers through exceptional customer service and innovative technology. Our commitment to punctuality, safety, and personalized service sets us apart from competitors. As an industry-disruptor, FlyRight Airlines has been recognized with the prestigious ‘Best Customer Service’ award for three consecutive years.”

Stellar Business Tip: Showcase your airline’s achievements and accolades to build credibility and confidence among potential investors and partners.

Outline the legal structure of your airline and discuss the management team’s roles and expertise. Provide an organizational chart to showcase the hierarchy and responsibilities of key personnel.

Example: “SkyJet Airways is registered as a private corporation in accordance with aviation regulations. Our management team comprises seasoned professionals with extensive experience in the aviation and hospitality industries. John Smith, our CEO, brings over 20 years of leadership experience in major airlines, ensuring efficient operations and strategic decision-making.”

Stellar Business Tip: Highlight the expertise of key team members and their significant contributions to the success of your airline.

Develop a robust marketing and sales strategy to attract and retain customers. Utilize data-driven insights and statistics to demonstrate the effectiveness of your marketing initiatives.

Example: “SkyGlide Airlines’ marketing strategy focuses on digital channels, social media, and influencer partnerships to reach our target audience effectively. Our market research indicates that millennial travelers heavily influence travel decisions, and thus, we invest significantly in social media marketing and user-generated content to create brand loyalty.”

Stellar Business Tip: Showcase your understanding of your target market’s preferences and how your marketing efforts align with their expectations.

Detail your fleet composition and specifications, including aircraft types and capacities. Discuss aircraft maintenance and safety procedures, emphasizing your commitment to ensuring a reliable and secure airline.

Example: “AirWings Fleet consists of modern and fuel-efficient aircraft, including Airbus A320neo and Boeing 787 Dreamliner, ensuring a comfortable and eco-friendly flying experience. Our partnership with leading maintenance providers guarantees the highest standards of safety and reliability, with regular maintenance checks and adherence to regulatory guidelines.”

Stellar Business Tip: Focus on the safety and comfort features of your fleet to instill confidence in your airline’s operations.

Create comprehensive financial projections based on market research and sound assumptions. Utilize charts and tables to present revenue forecasts, cost structures, and projected profitability.

Example: “Our financial projections anticipate steady growth, with projected revenue of $100 million in the first year, reaching $500 million by the fifth year. This growth will be supported by a robust marketing strategy, optimized operational costs, and an expanding customer base.”

Stellar Business Tip: Provide a clear breakdown of revenue streams and cost drivers to demonstrate your financial stability and growth potential.

Explain the initial investment required to launch and operate your airline. Showcase your budget for start-up costs and capital expenditures, providing clarity to potential investors about the financial requirements.

Example: “AirSprint Airways requires an initial investment of $50 million, which will cover aircraft acquisition, staff training, marketing campaigns, and administrative expenses. We are seeking strategic investors who share our vision of transforming air travel and are committed to long-term partnerships.”

Stellar Business Tip: Clearly articulate your funding needs and explain how the investment will be utilized to drive the growth of your airline.

Identify potential risks in the airline industry and outline your risk mitigation strategies. Present contingency plans to assure stakeholders of your preparedness for challenges.

Example: “SkyWings Airlines has conducted a comprehensive risk analysis, identifying potential risks such as fuel price volatility, geopolitical tensions, and regulatory changes. Our risk mitigation strategies include hedging fuel costs, diversifying routes, and maintaining strong relationships with aviation authorities to navigate regulatory changes smoothly.”

Stellar Business Tip: Address potential risks proactively and demonstrate your airline’s ability to adapt to unforeseen circumstances.

Discuss the licensing and certification requirements necessary for operating an airline. Show how your airline will comply with aviation authorities and regulations.

Example: “AviaJet is committed to maintaining the highest standards of safety and compliance with all aviation regulations. We are currently in the process of obtaining an Air Operator’s Certificate (AOC) and expect to launch operations after receiving all necessary approvals from the Civil Aviation Authority.”

Stellar Business Tip: Emphasize your commitment to adhering to all legal and regulatory requirements to gain trust from investors and passengers.

Impact Promote sustainability initiatives and demonstrate your commitment to reducing the airline industry’s environmental impact. Showcase your airline’s dedication to adopting eco-friendly practices.

Example: “EcoFlight Airlines is dedicated to minimizing our carbon footprint and preserving the environment. We are investing in modern, fuel-efficient aircraft, adopting sustainable inflight practices, and exploring alternative fuels to achieve carbon neutrality by 2030.”

Stellar Business Tip: Highlight your airline’s commitment to sustainability, as it aligns with the growing eco-consciousness of travelers.

Creating an airline business plan requires careful planning, extensive research, and a clear vision of your airline’s future. By following this comprehensive guide, you are equipped to build a solid foundation for your airline’s success. Stellar Business Plans is here to provide you with expert guidance and support in crafting an impressive business plan that will impress investors and stakeholders. Together, we can embark on a journey to make your airline a soaring success. Get ready to take flight with Stellar Business Plans!

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Updated On : September 2, 2023

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StartupBoeing

Prepare for takeoff.

Starting an airline is tough. Running a profitable airline is even tougher. From startup airlines to established industry leaders, the process involves constant learning and adaptation.

Few businesses have as many variables and challenges as airlines. They are capital-intensive. Competition is fierce. Airlines are fossil fuel dependent and often at the mercy of fuel price volatility. Operations are labor intensive and subject to government control and political influence. And a lot depends on the weather.

But the intrepid entrepreneur is not alone. The StartupBoeing team assists entrepreneurs in launching new airlines. From concept through launch, StartupBoeing offers guidance, review, analysis, data, resources, contacts, and referrals to qualified startup airlines.

For further questions or dialogue, please e-mail us at [email protected] .

Market Analysis

Entrepreneurs who are considering a startup airline launch are wise to study the commercial aviation market. Three comprehensive publications are very useful in providing a detailed analysis of traffic growth, regional trends, and airplane requirements. They are produced by Boeing and highly regarded throughout the industry.

Commercial Market Outlook World Air Cargo Forecast Current Aircraft Finance Market Outlook

Operating Environment

Startup airlines must be aware of and operate within a framework of regulations, standards and guidelines. Included here is basic information on some of the primary international agreements and programs that shape the operating environment for commercial aviation.

Learn about the " Freedoms of the Air ," a set of international rights that allow a country's airlines to enter the airspace of another country or land there.

Find out more about ETOPS , or Extended Operations, a collaborative industry/government program allowing airplanes to fly routes with longer diversion times.

Business Planning

Successful startup airlines begin with a sound business plan. This detailed planning document typically includes:

• Analysis of the market and competition
• Brand positioning
• Description of the business and opportunity
• Details about the operation
• Management team biographies
• Discussion of risks and obstacles
• Pro forma financial statements/projections
• Capitalization plan
• Brand development
• Implementation strategy.

The business plan is the fundamental starting point for working effectively with theStartupBoeing consulting team. StartupBoeing provides free review services of the business plan and corresponding financials. We offer constructive suggestions, question assumptions, and challenge the entrepreneur to prove the concept just as prospective investors might. For entrepreneurs requiring assistance in preparing the plan itself, StartupBoeing can suggest advisors worldwide who specialize in such services.

The Structural Plan

The Airline Planning Roadmap (PDF) offers a conceptual sense of the necessary steps in launching an airline from idea through launch.

Business Plan Questions (PDF) provides a list of important questions to consider when writing the business plan.

Brand Foundation Overview (PDF) provides a list of steps to take to position your emerging brand based on your market analysis and a need to differentiate from existing competitors.

Structuring the Plan

The Airline Business Plan Outline (PDF) is a tool for capturing many of the important elements for successfully starting and operating an airline. While it is not a comprehensive structure for all airline concepts, it can serve as a starting framework for a business plan.

Airplane Selection

Target markets and frequencies are determined through traffic analysis and route/schedule planning. The startup airline is now positioned to select the appropriate airplane. Included here is basic airplane data a startup-airline can use to make a preliminary aircraft selection and complete a compelling business plan.

Interactive Aircraft Comparator

In-Production Airplanes

Out of production airplanes, passenger airplanes.

• 727 (727-100/-100C/-200)
• 737 (737-200/-200C)
• 737 (737-300/-400/-500)
• 737 (737-600/-700/-800/-900ER)
• 747 (747-100/-200/-300/SP)
• 747 (747-400/-400ER)
• 757 (757-200/-300)
• 767 (767-200/-200ER/-300/-300ER/-400ER)
• 777 (777-200/-200ER/-200LR/-300/-300ER)

Freighter Airplanes

• 707-320C Freighter
• 727-100/-200 Freighter
• 737-200/-300 Freighter
• 747-200F/-200SF/-100SF
• 747 Freighter (747-400/-400ER)
• 757-200 Freighter
• DC-8 Freighter
• DC-9 Freighter
• DC-10 Freighter
• MD-11 Freighter

Boeing Converted Freighters

• 747-400 BCF

Airplane Support

Visit Boeing Support and Services to learn more about Boeing global customer support, including spares & logistics support, maintenance and engineering services, fleet enhancements and modifications, and flight operations support.

The Boeing Airport Compatibility Group assists the aviation community to address their airport-related issues regarding our airplanes, providing Boeing and McDonnell Douglas commercial airplane product information needed to promote the continued and timely development of the world's airports.

Boeing provides a variety of documents that provide Airplane Characteristics data for General Airport Planning . Sections within each document include airplane description, airplane performance, ground maneuvering, terminal servicing, operating conditions, and pavement data.

Learn more about the pallets and containers used to carry cargo on-board large Boeing aircraft, including specific designations, dimensions, descriptions and visuals.

View a glossary of airplane terms .

Airplane Sourcing

Selecting the optimal airplane based on market, network plan, traffic estimates, interior layout, economics, and performance requirements is a good start. But now the airline entrepreneur must source the airplane. Decisions must be made about lease-versus-buy and new-versus-used. Airplane availability may be a challenge. Such factors may drive the airplane selection or even change the business model.

An important first step in sourcing the airplane is to consider financing options . The two most common methods of financing airplanes are direct purchase and operating lease.

New Airplanes

Depending on current production line availability, financing, business plan, and desired launch date, a startup airline may consider purchasing a new production airplane.

Leasing New or Used Airplanes

Boeing works with major airplane leasing companies worldwide. StartupBoeing is able to match qualified startup airlines with Boeing's leasing partners.

Lease Rates

Boeing does not regularly track airplane market lease rates. However, a range of lease rates can be provided to qualified startup airlines.

Through Boeing Commercial Aircraft Customer Finance, qualified startup airlines can be matched with third party sellers/lessors of used airplanes.

Third Party Used Airplanes

Through Boeing's internal Trading Floor, qualified startup airlines can be matched with third party sellers/lessors of used airplanes. Other sources of used airplane availability include:

Operating Your Airline

Boeing offers startup airlines the industry’s largest portfolio of commercial aviation support and services essential for running a successful airline. Through Boeing Global Services startup operators have access to everything from training and interior modifications to aircraft maintenance and high-tech enhancements.

The following solutions are available to suit your specific startup plans and requirements.

Maintenance & Parts Solutions

Boeing’s Maintenance and Part solutions help you to manage maintenance, modification, repair, overhaul and upgrades of your fleet while simplifying your supply chain. One of the services most applicable to a new airline is Global Fleet Care.

Boeing’s Global Fleet Care gives you the most comprehensive maintenance program available.

Global Fleet Care can:

• Help a new entrant operator conserve startup maintenance program capital
• Provide a competitive hourly maintenance rate that reduces airline staffing requirements.
• Include initial parts provisioning
• Supply engineering services
• Provide 24/7 Customer Support and Airplane Health Monitoring

Flight Operations Solutions

Boeing’s Flight Operations Solutions provide full flight operations support that is scalable to grow as your airline expands and your operational complexity increases. From pilot training to start of operations and beyond, our suite of products will provide the highest quality tools for your crews to deliver an efficient flight operation.

Services most applicable to a new airline:

• Flight Planning
• Charts and Navigation
• Electronic Flight Bag (EFB)
• Pilot training and Simulator
• Performance Planning

Boeing Aviation Consultants

Boeing’s staff of experienced airline and consulting professionals can advise and assist with all activities associated with a new entrant airline.

Boeing’s Consultants can:

• Assist with securing an Air Operator Certificate (AOC) as well as other regulatory requirement filings
• Design and structure an efficient operations organization
• Advise in the development and regulatory approval of a maintenance program
• Design a parts optimization program
• Assist with route analysis and payload improvements
• Develop a fuel efficiency program
• Select Information Technology elements that are appropriate for the size of operation
• Prepare an airline for eventual transition to ‘smart’ airplanes

Once an airline is up and running, Boeing’s Aviation Consultants can also provide periodic, detailed operations analysis that can assist with optimizing your maintenance and fuel efficiency programs, as well as provide crew management solutions for best scheduling and utilization of crewmembers.

When you are ready to start your airline, Boeing is ready to help you every step of the way.

Boeing offers startup airlines a comprehensive array of tools and services for running a successful airline. Everything from training to interior design to financing to maintenance to high-tech enhancements and more. Available resources include:

• Aviation Partners Boeing : Fuel saving and performance enhancing Blended Winglets for a number of current production Boeing airplanes and out-of-production models
• Boeing Business Jets : Private, Business, and Government VIP configured Boeing production airplanes
• Boeing Support and Services : Customer Support, Material Management, Maintenance Services, Fleet Enhancement, Flight Operations
• Fuel Conservation Services : Optimizing your operations to maximize airplane fuel efficiency
• Jeppesen : Aviation Training, Charts & Navigation Services, Flight Planning and Custom Services
• Training & Flight Services : Maintenance and Flight Crew Training

Becoming a Customer

Whether you are starting a new airline with Boeing aircraft, adding your first Boeing aircraft to your existing fleet, or you are new to maintaining Boeing aircraft, we have the products, services, and information resources needed to get you off the ground and keep you flying.

Relationship

Creating a business relationship with Boeing can provide access to:

• Boeing expertise
• Support services needed for the introduction, operation and maintenance of your aircraft

What do you need?

If you are a Maintenance Repair and Overhaul (MRO) or repair station, please see the Intellectual Property Management - Licensing Questionnaire .

In order to obtain Boeing goods and services, it will be necessary to enter into an agreement with Boeing and set-up an account. To begin the account set-up process, complete and submit a Boeing Customer Questionnaire . This questionnaire must be completed and submitted electronically.

Upon receipt of the completed questionnaire and based upon the information you submit, Boeing will:

• Start the process of establishing an account so your company can do business with Boeing.
• Assign your company a Boeing customer code which will identify your company within Boeing for future business transactions.
• Identify you as the owner, operator, or lessee of the aircraft.
• Supplemental Agreement for Electronic Access (SA-EA)
• Supplemental Agreement for Electronic Enabling (SA-eE)
• Provide you with certain documents at no charge when the CSGTA and its supplements are signed and appropriate insurance is obtained.

Access to Boeing Part Page

Boeing Material Services offers the advantage of buying from the original equipment manufacturer (OEM).

Boeing also provides customers with access to the aftermarket for a wider breadth of resources to locate hard-to-find parts. From single transactions to supply chain management, Boeing provides you with the right part, at the right place, at the right time. For more access information, please contact [email protected] .

Intellectual Property Management - Licensing Questionnaire

Aircraft owner/operators and third-party service providers have particular needs for OEM products and services as they support the industry. These products and services may require the use of information that is created during the development and certification of Boeing products. Comments from the industry have helped us to establish a set of Intellectual Property licensing standards that address specific requirements and establish a fair and consistent fee structure for the use of the information developed.

Take the Intellectual Property Management - Licensing Questionnaire .

Customer Services General Terms Agreement (CSGTA)

The Customer Services General Terms Agreement (CSGTA) incorporates articles applicable to various Boeing products and services into a blanket-type agreement so that, once in place, only unique terms and conditions need to be negotiated when a customer requires a specific product or service. The benefits of this approach are:

• Faster responses to requests from customers for products and services.
• A reduction in resources and effort needed to implement and manage all Customer Support related agreements for both customer and Boeing.

Some examples of the products and services covered by the CSGTA are lease of parts and tools, purchase of spare parts and standards, retrofit kit changes, repair, modification, technical assistance/consulting, training services and technical data.

Two Supplemental Agreements are associated with the CSGTA. The Supplemental Agreement to the CSGTA for Electronic Access (SA-EA) incorporates articles specific to granting you electronic access to Boeing goods and services, specifically technical data available on MyBoeingFleet.com. The Supplemental Agreement to the CSGTA for Electronic Enabling (SA-eE) incorporates articles specific to software licensing.

Part 125 Airplane Operating Certificate (AOC)

To apply for a part 125 AOC you will need to provide certain documents to your regulatory agency such as the Maintenance Planning Document (MPD), Quick Reference Handbook (QRH), and Aircraft Flight Manual (AFM). Our business operations group will help you get access to these documents on a temporary basis to help you with your AOC application.

MyBoeingFleet (MBF)

MyBoeingFleet is Boeing's secure internet portal, providing authorized customers with access to the industry's most comprehensive range of support products and services for Boeing commercial aircraft.

Aircraft owners and operators - as well as maintenance providers, leasing companies, regulatory agencies and other third party service providers - use MyBoeingFleet to order parts, collaborate with Boeing experts, and obtain essential information such as drawings, documentation, manuals, and operational data and procedures.

Owner/operators and licensed maintenance providers can also access productivity solutions such as Maintenance Performance Toolbox and Airplane Health Management.

Frequently Asked Questions

I want to start an airline. how can the startupboeing site help.

The StartupBoeing site is filled with information that will be useful in starting an airline. In starting an airline, there are specific steps that should be followed, and they are laid out in order to help you along your journey.

• Step 1:  Market Analysis
• Step 2:  Operating Environment
• Step 3:  Business Planning
• Step 4:  Airplane Selection
• Step 5:  Airplane Sourcing

How can we obtain Boeing aircraft performance data for our planned operations?

The StartupBoeing team has found that this usually is not the first question to ask when starting an airline. The market opportunity and business plan will help shape what aircraft to fly. Once an understanding of the market opportunity and competitive environment are established, the StartupBoeing team can assist in providing suggestions for aircraft and ultimately performance data to fit the market opportunity.

Can Boeing lease me an aircraft?

Boeing generally does not lease aircraft. Aircraft leasing is usually done by third parties not associated with Boeing. To help you find these leased aircraft, Boeing has provided links to these parties found in the Airplane Sourcing section.

I want to buy a used aircraft from Boeing. How much does it cost?

Boeing generally does not sell used aircraft. Used aircraft are usually sold by third parties not associated with Boeing. To help you find these used aircraft, Boeing has provided links to these parties found in the Airplane Sourcing section.

Where can I find information on Boeing airplanes?

Information on passenger and freighter airplanes, along with information on cargo hold sizes can be found in the Airplane Selection section.

Where can I find a definition of aircraft terms?

A glossary of aircraft terms can be found here .

Where can I find airplane market data?

The Boeing Current Market Outlook (CMO) and World Air Cargo Forecast can be found in the Market Analysis section.

Where can I find information on business planning?

Information on business plans can be found in the Business Planning section.

Where can I find information about regulatory requirements?

Information about regulatory requirements can be found in the Operating Environment section.

Airline Company Business Plan [Sample Template]

By: Author Joy Nwokoro

Home » Business ideas » Aviation Industry » Airline

An airline company is a business that provides air transportation services for passengers and cargo. Its primary function is to use airplanes to carry people and goods between various destinations, both domestically and internationally.

The airline industry is a crucial part of the global transportation network and it plays a significant role in facilitating travel, trade, and economic growth.

The airline industry is highly competitive and subject to various economic, political, and environmental factors that can significantly impact its operations and financial performance. As a result, successful airline companies must be adaptive, innovative, and customer-oriented to thrive in this dynamic sector.

Steps on How to Write an Airline Company Business Plan

Executive summary.

Fly Mario® Airline Company, Inc. is a dynamic and customer-focused airline based in Dallas/Fort Worth, Texas, Texas, committed to providing safe, reliable, and convenient air transportation services. With a mission to connect people and places, we aim to be the preferred choice for both domestic and international travel, setting new standards of excellence in the airline industry.

Dallas/Fort Worth, Texas, as a major hub for business and tourism, presents significant opportunities for growth. With its diverse population and strong economic foundations, the city demands reliable air travel options, and Fly Mario® Airline Company, Inc. is poised to capture a substantial share of this market.

Fly Mario® Airline Company, Inc. was established in 2015, and since then, we have grown steadily to become one of the leading airlines in the region. Our modern fleet of state-of-the-art aircraft, combined with a highly trained and professional crew, ensures that our passengers experience unparalleled comfort and security throughout their journey.

Company Profile

A. our products and services.

Fly Mario® Airline Company, Inc. has an extensive route network, connecting major cities and popular tourist destinations in the United States and beyond. Our strategic partnerships with international carriers enable us to offer seamless travel options to our customers.

At Fly Mario®, customer satisfaction is our top priority. We are committed to providing exceptional service that exceeds expectations. From easy online booking to hassle-free check-ins and inflight amenities, we focus on every detail to make our passengers’ experience truly memorable.

b. Nature of the Business

Our airline company will operate with a business-to-consumer and business-to-business model.

c. The Industry

Fly Mario® Airline Company, Inc. will operate in the transportation industry (specifically within the aviation or airline industry).

d. Mission Statement

At Fly Mario® Airline Company, Inc., our mission is to connect people and places, providing safe, reliable, and exceptional air travel experiences. We are committed to exceeding our passengers’ expectations by delivering unparalleled service, convenience, and comfort.

With a customer-centric approach and a passion for innovation, we aim to be the preferred choice for domestic and international travelers.

e. Vision Statement

Our vision at Fly Mario® Airline Company, Inc. is to be a leading global airline, admired for our commitment to safety, excellence, and sustainability. We aspire to expand our route network, offering seamless connections to major destinations worldwide.

Through strategic alliances, cutting-edge technology, and an unwavering focus on customer satisfaction, we aim to set new industry standards while upholding our core values of integrity, responsibility, and respect.

f. Our Tagline (Slogan)

Fly Mario® Airline Company, Inc. – “Where Dreams Take Flight with Fly Mario®”

g. Legal Structure of the Business (LLC, C Corp, S Corp, LLP)

Fly Mario® Airline Company, Inc. will be formed as a Limited Liability Company (LLC).

h. Our Organizational Structure

• Chief Executive Officer (President)
• Logistics and Operations Manager
• Human Resources and Amin Manager
• Maintenance Engineer
• Air Hostess
• Sales and Marketing Manager
• Accountants (Cashiers)
• Customer Services Executive/Front Desk Officer

i. Ownership/Shareholder Structure and Board Members

• Solomon Stephen (Owner and Chairman/Chief Executive Officer) 52 Percent Shares
• Jude Justin (Board Member) 18 Percent Shares
• Chris Fox (Board Member) 10 Percent Shares
• Merrick Baseman (Board Member) 10 Percent Shares
• Kate Hanson (Board Member and Secretary) 10 Percent Shares.

SWOT Analysis

A. strength.

• Fly Mario® has established a recognizable and trusted brand identity, known for its commitment to customer satisfaction and quality service.
• The airline has a wide range of domestic and international routes, providing passengers with numerous travel options and convenient connections.
• Fly Mario® prioritizes customer needs and consistently delivers exceptional experiences, earning customer loyalty and positive word-of-mouth.
• The airline operates a modern fleet of fuel-efficient aircraft equipped with the latest technology, ensuring safety, reliability, and environmental sustainability.
• Fly Mario® has forged strategic alliances with other airlines and travel partners, enabling access to additional destinations and offering seamless travel experiences.
• The airline employs a highly trained and motivated workforce, including experienced pilots, cabin crew, and ground staff, contributing to operational excellence.

b. Weakness

• In certain markets, Fly Mario® faces strong competition from well-established airlines, limiting its market share in specific regions.
• High operating costs, such as fuel expenses, maintenance, and airport fees, can impact profitability, especially during periods of economic downturn or rising fuel prices.
• The airline industry is influenced by various external factors, such as weather conditions, geopolitical events, and economic fluctuations, which can disrupt operations and revenue.

c. Opportunities

• Fly Mario® can explore new markets and routes to tap into emerging travel trends and growing demand in untapped regions.
• Investing in more fuel-efficient and advanced aircraft can lead to cost savings and a reduced environmental footprint, aligning with sustainability goals.
• Introducing additional ancillary services, such as in-flight entertainment, premium seat options, and travel packages, can enhance revenue generation.
• Embracing cutting-edge technology for ticketing, reservation systems, and customer interactions can streamline operations and improve the overall passenger experience.

i. How Big is the Industry?

The airline industry is indeed a big and significant sector in the transportation industry. As a matter of fact, the global airline industry generated hundreds of billions of dollars in annual revenue, making it one of the most revenue-intensive industries worldwide.

ii. Is the Industry Growing or Declining?

The airline industry is a growing industry. As a matter of fact, the demand for airline services has been steadily increasing in recent years. However, it is important to note that the airline industry is highly dynamic and can experience fluctuations based on various factors, including global economic conditions, geopolitical events, and health crises.

iii. What are the Future Trends in the Industry?

Airlines were expected to prioritize sustainability and environmental responsibility. This included investing in more fuel-efficient aircraft, exploring alternative fuels, and implementing eco-friendly practices to reduce their carbon footprint.

The industry embraced digital technologies to enhance passenger experience. This included mobile check-ins, personalized offers, in-flight Wi-Fi, and the use of artificial intelligence (AI) and data analytics to improve operations and customer service.

Post the COVID-19 pandemic, health and safety became a top priority. Airlines were anticipated to continue implementing stringent hygiene protocols, touchless check-ins, and enhanced cleaning measures to ensure passenger safety. The pandemic accelerated the adoption of remote work, leading to potential changes in business travel patterns.

The industry was exploring the use of hybrid and electric-powered aircraft to reduce emissions and fuel consumption, potentially leading to more sustainable aviation. Blockchain was gaining attention in the industry for its potential to streamline processes related to ticketing, baggage handling, and loyalty programs.

iv. Are There Existing Niches in the Industry?

Yes, there are existing niches when it comes to the airline business and some of them are:

• Commercial airline (passenger airline)
• Jet charter
• Air ambulance
• Cargo airline.

v. Can You Sell a Franchise of Your Business in the Future?

Fly Mario® Airline Company, Inc. has no plans to sell franchises in the near future.

• The airline industry is fiercely competitive, with both established carriers and new entrants vying for market share, potentially leading to price wars and reduced profit margins.
• Fluctuations in fuel prices can significantly impact operational costs, affecting the airline’s profitability.
• Evolving aviation regulations and policies can impose compliance challenges and increase operating expenses.
• Unforeseen events, such as pandemics, natural disasters, or political crises, can disrupt travel demand and operations on a global scale.

i. Who are the Major Competitors?

• American Airlines
• Delta Air Lines
• United Airlines
• Southwest Airlines
• Alaska Airlines
• JetBlue Airways
• Spirit Airlines
• Frontier Airlines
• Allegiant Air
• Hawaiian Airlines
• Sun Country Airlines
• Virgin America
• SkyWest Airlines
• Mesa Airlines
• Republic Airways
• Endeavor Air
• ExpressJet Airlines
• Piedmont Airlines
• PSA Airlines

ii. Is There a Franchise for Airline Business? 

No, there are no franchise opportunities for the airline business because of the nature of the business.

iii. Are There Policies, Regulations, or Zoning Laws Affecting Airline Business?

Yes, there are various policies, regulations, and zoning laws that affect the airline business in the United States of America. These rules are put in place to ensure safety, fairness, and efficient operations within the aviation industry.

Federal Aviation Administration (FAA) is the primary regulatory body responsible for overseeing civil aviation in the United States. They establish and enforce safety standards for aircraft, pilots, and maintenance procedures. Airlines must comply with these regulations to operate legally and ensure the safety of their operations.

Airport Zoning Laws regulate land use around airports to ensure that developments near airfields do not interfere with flight operations. Zoning laws may restrict the height of buildings, noise levels, and other factors that could affect aircraft safety and efficiency.

Transportation Security Administration (TSA) Regulations is responsible for security in transportation systems, including aviation. They implement and enforce security measures at airports, such as passenger screening, baggage checks, and the screening of cargo to prevent threats to aviation security.

Airlines are subject to various environmental regulations aimed at reducing their impact on the environment, including emissions standards, noise restrictions, and fuel efficiency requirements. Federal Aviation Act provides the legal framework for aviation regulation in the U.S., defining the roles and responsibilities of various agencies and entities in the aviation industry.

The Department of Transportation (DOT) plays a significant role in regulating and overseeing various aspects of the airline industry, including consumer protection, airline competition, and enforcement of aviation-related laws.

Marketing Plan

A. who is your target audience.

i. Age Range

The target audience at Fly Mario® Airline Company, Inc. spans various age groups, with a primary focus on adults between the ages of 25 to 60. This demographic includes working professionals, business travelers, and leisure travelers seeking quality air travel experiences.

ii. Level of Education

The target audience comprises individuals with diverse educational backgrounds, ranging from high school graduates to those with advanced degrees.

iii. Income Level

Fly Mario® Airline Company, Inc. caters to a diverse income level audience. While it offers affordable and competitive ticket pricing to attract budget-conscious travelers, it also provides premium services and amenities for high-income passengers seeking luxury and convenience during their travels.

iv. Ethnicity: Fly Mario® Airline Company, Inc. aims to be inclusive and welcoming to passengers of all ethnic backgrounds.

v. Language

The airline’s services are available in multiple languages to accommodate passengers from different linguistic backgrounds.

It ensures that essential communication, including in-flight announcements and customer service interactions, is available in commonly spoken languages, making the flying experience more accessible and enjoyable for all passengers.

vi. Geographical Location

As a global airline, Fly Mario® Airline Company, Inc. operates across a wide geographical area, serving both domestic and international destinations.

vii. Lifestyle

The target audience for Fly Mario® Airline Company, Inc. encompasses a diverse range of lifestyles. It caters to business travelers seeking efficiency and convenience, families looking for a pleasant travel experience, leisure travelers desiring adventure and exploration, and individuals who value comfort and relaxation during their journeys.

b. Advertising and Promotion Strategies

• Content marketing
• Deliberately Brand All Our Trucks
• Email marketing
• Events and sponsorships
• Pay-per-click (PPC) advertising
• Referral marketing
• Search engine optimization (SEO).

i. Traditional Marketing Strategies

• Broadcast Marketing -Television & Radio Channels.
• Marketing through Direct Mail.
• Print Media Marketing – Newspapers & Magazines.
• Out-of-home (OOH) advertising – Public transit like Buses and Trains, Billboards, Street shows, and Cabs.
• Leverage direct sales, direct mail (postcards, brochures, letters, fliers), tradeshows, print advertising (magazines, newspapers, coupon books, billboards), referral (also known as word-of-mouth marketing), radio, and television.

ii. Digital Marketing Strategies

• Affiliate Marketing
• Content Marketing.
• Email Marketing.
• Influencer Marketing.
• Mobile Marketing.
• Social Media Marketing Platforms.
• Search Engine Optimization (SEO) Marketing.

iii. Social Media Marketing Plan

• Create a personalized experience for our customers.
• Create an efficient content marketing strategy.
• Create a community for our target market and potential target market.
• Create profiles on relevant social media channels.
• Gear up our profiles with a diverse content strategy.
• Start using chatbots.
• Run cross-channel campaigns.
• Use brand advocates.

c. Pricing Strategy

At Fly Mario® Airline Company, Inc., our pricing strategy is designed to offer a balance between affordability and value, ensuring that passengers have access to a range of ticket options while maintaining a high standard of service. Our approach considers various factors to remain competitive in the market and appeal to a diverse customer base. Key elements of our pricing strategy include:

• Dynamic Pricing
• Fare Classes
• Bundled Services
• Loyalty Programs
• Promotions and Special Offers
• Transparent Pricing
• Partner and Codeshare Agreements.

Sales and Distribution Plan

A. sales channels.

At Fly Mario® Airline Company, Inc., we employ a multi-channel approach to reach and engage with our customers, ensuring accessibility and convenience throughout the booking and travel process.

Our primary and most popular sales channel is our user-friendly website. Through our online booking platform, customers can easily search for flights, view available seats, compare fares, and make reservations. We offer a seamless and secure online payment system, providing customers with the convenience of booking their flights from the comfort of their homes or mobile devices.

We collaborate with travel agencies to expand our reach and cater to customers who prefer using travel agents for their bookings. By partnering with reputable agencies, we extend our sales network and offer our services to a broader audience.

b. Inventory Strategy

At Fly Mario® Airline Company, Inc., our inventory strategy ensures a well-maintained fleet, essential equipment, proactive maintenance, collaborative partnerships, supply chain visibility, a just-in-time approach, and flexibility. By optimizing resources and adapting to changing customer demands, we provide reliable and timely airline services.

While airline typically involves smaller-sized loads and more flexible scheduling, we still require a well-managed inventory strategy to ensure prompt and reliable service.

c. Payment Options for Customers

Here are the payment options that Fly Mario® Airline Company, Inc. will make available to its clients:

• Apple Pay and Google Wallet
• Gift cards and store credit
• Credit and debit cards
• Installment payments
• Cash on service delivery.

d. Return Policy, Incentives, and Guarantees

Return policy:.

At Fly Mario® Airline Company, Inc., we understand that plans may change, and unforeseen circumstances may arise. To provide our customers with flexibility and peace of mind, we offer a comprehensive and customer-friendly return policy for flight bookings. Our return policy includes the following key elements:

Depending on the fare class and the time of cancellation, customers may be eligible for a full refund, a partial refund, or the option to receive travel credits for future use.

Incentives:

Our loyalty program offers various benefits to frequent flyers, such as earning points or miles for each journey that can be redeemed for future flights or other exclusive rewards.

Members of our loyalty program receive access to exclusive discounts and promotional offers, providing them with cost-saving opportunities for their travels. As a token of appreciation, loyal customers may be eligible for complimentary upgrades to higher fare classes and access to priority services such as priority check-in and boarding.

Guarantees:

At Fly Mario® Airline Company, Inc., we take pride in our commitment to providing a reliable and satisfying travel experience for our customers.

e. Customer Support Strategy

Providing exceptional customer support is crucial for the success of our airline company. Here are some customer support strategies that we will adopt:

• Provide multiple communication channels
• Offer personalized attention
• Set clear expectations.
• Provide timely and safe delivery
• Maintain transparency.
• Offer value-added services.

Our customer service team is available 24/7 to assist customers with their return requests, ensuring prompt and efficient service.

Operational Plan

• Maintain a fleet of modern and well-maintained aircraft to ensure safety, efficiency, and passenger comfort.
• Regularly scheduled flights to various destinations, considering factors such as demand, seasonality, and connectivity.
• Optimize flight routes and capacity utilization to maximize operational efficiency and profitability.
• Comply with all aviation regulations and safety standards set by relevant authorities.
• Implement rigorous safety protocols and procedures to ensure the highest level of safety for passengers, crew, and aircraft.
• Conduct regular maintenance checks and inspections to keep the fleet in top condition.

a. What Happens During a Typical Day at an Airline Business?

A typical day at an airline business is a well-orchestrated operation involving various departments and personnel working together to ensure smooth flight operations, excellent customer service, and efficient ground handling. Specific activities can vary depending on the size and scope of the airline.

b. Production Process

There is no production process when it comes to the airline business.

c. Service Procedure

At Fly Mario® Airline Company, Inc., we are committed to providing our passengers with an exceptional travel experience from the moment they book their flights until they reach their destinations. Our service procedure encompasses various stages of the customer journey:

Booking and Pre-Flight Stage: Passengers can book their flights through our user-friendly website, mobile app, call center, or authorized travel agents.

Pre-Departure Stage: Passengers receive a booking confirmation with essential flight details and a summary of their travel itinerary.

Check-in and Boarding: Passengers can check in for their flights online, through the mobile app, or at airport self-service kiosks. At the airport, our ground staff ensures a smooth and efficient check-in process.

In-Flight Experience: Passengers can enjoy a range of in-flight entertainment options, including movies, TV shows, music, and games. Meals and beverages are served, and special dietary requirements are accommodated upon prior request.

On-Time Performance: In the event of any delays or disruptions, we provide timely updates and assistance to affected passengers.

Arrival and Baggage Claim: Upon arrival at the destination, ground handling teams assist passengers with disembarkation.

d. The Supply Chain

A supply chain is not applicable to the airline business.

e. Sources of Income

The main source of revenue for Fly Mario® Airline Company, Inc. comes from the sale of airline tickets to passengers. This includes fares for all classes of travel, such as economy, premium economy, business, and first class. Ticket sales account for a significant portion of our overall income.

Financial Plan

A. amount needed to start your airline company .

Fly Mario® Airline Company, Inc. would need an estimate of $150 million to successfully set up our airline company in the United States of America. Please note that this amount includes the salaries of all our staff for the first month of operation.

b. What are the costs involved?

• Business Registration Fees – $2,500.
• Legal expenses for obtaining licenses and permits – $34,300.
• Marketing, Branding, and Promotions – $25,000.
• Business Consultant Fee – $50,500.
• Insurance – $5 million.
• Rent/Lease – $3 million
• Operational Cost (salaries of employees, payments of bills et al) – $9 million
• Equipment and Furnishing – $1 million
• Airplane (leasing agreements) – $85 million
• Website: $2,500
• Opening party: $8,000
• Miscellaneous: $2 million

c. Do You Need to Build a Facility? If YES, How Much will it cost?

Fly Mario® Airline Company, Inc. will not build a new facility for our airline company; we intend to start with a long-term lease and after 5 years, we will start the process of acquiring our own facility.

d. What are the Ongoing Expenses for Running an Airline Company?

• Aircraft Maintenance
• Employee Salaries and Benefits
• Airport Fees and Charges for landing, parking, and terminal usage.
• Insurance Premiums
• Marketing and Advertising
• Administrative and Overhead Costs (office rentals, utilities, office supplies, accounting, legal services, and other administrative expenses).
• Costs related to providing in-flight services, such as catering, in-flight entertainment, and amenities
• Ongoing training programs for pilots, cabin crew, and other personnel
• Navigation and Air Traffic Control Fees
• Ongoing expenses for IT infrastructure, reservation systems, and digital platforms
• Cleaning and Ground Handling
• Regulatory and Certification Fees

e. What is the Average Salary of your Staff?

• Chief Executive Officer (President) – $180,000 per year
• Logistics and Operations Manager: around $85,000 per year
• Human Resources and Admin Manager – $70,000 per year
• Pilot – $120,000 per year
• Maintenance Engineer – $70,000 per year
• Cabin Crew – $50,000 per year
• Sales and Marketing Manager – $45,000 per year
• Accountants (Cashiers) – $45,000 per year
• Customer Service Representative: $33,000 per year.

f. How Do You Get Funding to Start an Airline Company?

• Raising money from personal savings and sale of personal stocks and properties
• Raising money from investors and business partners
• Sell shares to interested investors
• Applying for a loan from your bank/banks
• Pitching your business idea and applying for government funds, and angel investors
• Source for soft loans from your family members and your friends.

Financial Projection

A. how much should you charge for your product/service.

For domestic flights within the United States, the average cost of an economy-class ticket can range from around $150 to $600, depending on factors such as distance, seasonality, and how far in advance the ticket is purchased.

Short-haul flights (e.g., one to two hours of flying time) typically cost less, while longer-haul or transcontinental flights can be more expensive. For international flights departing from the U.S., ticket prices can vary widely depending on the destination, the airline, and the time of travel.

Economy class tickets for international flights can range from $500 to $2,000 or more, depending on factors such as the distance, the level of competition on the route, and the time of year.

b. Sales Forecast?

• First Fiscal Year (FY1): $22 million
• Second Fiscal Year (FY2): $35 million
• Third Fiscal Year (FY3): $42 million

c. Estimated Profit You Will Make a Year?

• First Fiscal Year (FY1) (Profit After Tax): 2 percent
• Second Fiscal Year (FY2) (Profit After Tax): 5 percent
• Third Fiscal Year (FY3) (Profit After Tax): 10 percent

d. Profit Margin of an Airline Company Product/Service

On average, the profit margin for airlines has been in the range of 2% to 5% in recent years. However, it is important to note that profit margins can fluctuate significantly from year to year and can be influenced by various external factors such as fuel price fluctuations, changes in demand, and global events.

Growth Plan

A. how do you intend to grow and expand by opening more retail outlets/offices or selling a franchise.

Fly Mario® Airline Company, Inc. will grow our airline company by opening up new local flight routes in the United States of America and international routes.

b. Where do you intend to expand to and why?

Fly Mario® Airline Company, Inc. plans to expand to;

• Atlanta, Georgia
• Los Angeles, California
• Chicago, Illinois
• Dallas/Fort Worth, Texas
• Denver, Colorado
• New York City, New York
• San Francisco, California
• Seattle, Washington
• Las Vegas, Nevada
• Orlando, Florida.

The reason we intend to expand to these locations is the fact that available statistics show that the cities listed above have the highest airline market (high air traffic) in the United States.

The founder of Fly Mario® Airline Company, Inc. plans to exit the business via merger and acquisition. We intend to merge with an international airline company that has a world spread so that the management of the company can be placed under a trusted hand when the founder retires.

The goal of combining two or more international airline companies on a global scale is to try and achieve synergy – where the whole (the new company) is greater than the sum of its parts (the former two separate entities).

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Simple Flying

How to start an airline: part 2 - developing a business plan.

It's time to plan your new airline - the operations, destinations, and fleet.

Welcome Aboard

So you have decided to start an airline. This is a big decision to take on a project that could quickly take over your life. But how do you actually go about it, and where do you begin? The process involved in starting an airline can be rewarding, enjoyable, and hopefully profitable too. But it can also be frustrating, fraught with challenges, and the next setback will always remain just around the next corner. But if you are determined to do this, let’s take a closer look at how you might go about achieving your goal.

The four key stages of planning

The first thing to do is develop a robust business plan for your airline . You should consider the four critical stages of planning, better known as what , where , how , and why . Your business plan could make all the difference between your airline becoming the next big deal or simply another casualty of the ruthless airline industry, itself littered with failures throughout its history.

Getting these first critical decisions right will improve your chances of succeeding and perhaps ensure your airline's survival chances in the future. Once you have rigorous and comprehensive answers to all four key stages, it will be time to draft your business plan.

Your airline business plan will act as the shop window for your airline that you will present to potential investors ; a document that can be peered throughout to see whether your offering is attractive enough to entice others inside and, hopefully, to part with their hard-earned dollars.

After all, unless you have bottomless pockets, you will be reliant on others to provide additional funding and investment to get your airline off the ground. We shall explore the whole issue of budget and finance in greater depth in the next part of this series.

The first stage of planning - What?

The first of the critical issues to address when you consider starting an airline is ' what '? What do you want to achieve exactly, bearing in mind that this may not be possible, cost-effective, safe, or even legal?

Focussing on developing your initial idea is all very well, but being flexible to change and ready for setbacks will be useful characteristics in your planning toolkit as you progress. You should develop an exact, detailed concept of what you want to do with your airline. What are your goals, and what do you need to achieve them.

What are your aims and ambitions? Do you want to start small and get bigger, or do you simply want to remain small and niche? Remember, many airlines survive because they stay small. Or are your aspirations to become a feeder carrier possibly, or a regional operator . Do you want to scale things up to become a short, medium, or even long-haul operator, flying the big jets to faraway destinations?

Is your airline going to be a scheduled carrier, a charter operator, or a combination of both? You might want to avoid the complications of fare-paying passengers altogether (often referred to in the airline world as ‘self-loading freight’) and specialize in the carriage of cargo only.

In principle, these are all feasible ventures, and the industry has successful examples in each sector. Honing on just one market segment initially and doing that well will be crucial before you even consider growing your business.

Once you have an established, well-developed concept of what you want your airline to be, you can progress to the next stage of the process.

The second stage of planning - Where?

Where you want to fly sits snugly alongside the ‘ what ’ question addressed above. You should be considering your proposed route structure , selecting your hub airports and your home base from the outset. You need to decide whether you wish to focus on being a point-to-point carrier or whether a hub-and-spoke operation might suit your airline better.

Remember that some airports you may wish to serve will be slot constrained, so a quick initiation into that airport's slot allocation process will be necessary. You may not be allocated a workable set of slots for your airline, so be prepared for some tough negotiating.

Recent startup airlines which appear to be making early progress with network planning are Breeze and Avelo in the US, selecting point-to-point routes to develop their business. PLAY in Iceland is aiming to build a viable hub-and-spoke network using Keflavik Airport (its home base) as its hub facility, offering decent levels of connectivity for passengers traveling over Iceland between the United States and Europe

Are you considering entering an existing market where you will compete with others, or will you target new, emerging markets, opening up regions and routes that would otherwise remain unserved by other carriers, such as Bonza , the excitable new startup in Australia?

Bearing in mind that you will require aircraft, crew, ground handling, maintenance provisions, and other services at each base you open dictates that you simply should not consider opening up a plethora of routes that are entirely unlinked to each other in any way.

Startup airlines regularly focus early operations on a single or minimal number of bases to start before they even consider expansion. An excellent current example of this is the new Flybe operation starting operations shortly. This new carrier (revived from the ashes of another carrier of the same name, which failed at the start of the pandemic) has limited its initial operation to just two small UK bases - Birmingham and Belfast City .

No doubt routes will be picked up and dropped from these bases in the early stages as Flybe refines its model. Yet, by staying small initially, the airline hopes to avoid having a dispersed network and fleet, which stretches resources and ultimately leads to operating a wide range of loss-making routes, just as its predecessor did.

While the 'what' question may have been based on intangibles, such as desire or ambition, the 'where' decisions will be primarily based on data and information.

Detailed route analysis using modeling and forecasting will be a prerequisite here. It will be imperative to have all your facts in numeric form so that forecasting and projections can be produced to act as your road map as you develop.

Route and network development consultancies can assist you in this process, as can the planning departments of airport authorities , as well as the leading commercial aircraft manufacturers.

Even a decision to fly a new 200-seat jet from point A to point B will find you with offers from all of these sources, each undoubtedly willing to provide planning assistance, particularly if there is something potentially in it for them. So don't be afraid to ask for help from those who know their industry best.

James Pearson , Simple Flying's very own in-house route and network planning expert, provides the following helpful advice for anyone considering a potential new airline's route structure -

Network planning requires solid research using multiple data sources, thinking creatively, and forecasting as accurately as possible. It also requires a strong gut instinct about what will work and why.

For low-cost and ultra-low-cost carriers especially, predicting market growth through stimulating demand is often essential. For many thin routes, this is crucial to make them viable, without which they would be too small.

Network planning isn't just a one-off process. It also requires continual market awareness to check what is happening to avail of more opportunities as they arise. No matter the work, not all routes will work or are expected to work. If they did, an airline wouldn't be experimenting enough.

The third stage of planning - How?

When considering the question of ' how' , there are various points to consider. Will you select just a single aircraft type for your operation, or does your plan call for several types? Without delving too deeply into economic theory relating to the principle of economies of scale, startup airlines have often seen success when focussing on a single type of aircraft - Southwest , Ryanair, or Wizz, all being good examples.

Selecting the correct aircraft type for your operation will be of utmost importance. Too small an aircraft, and you could be passing up the opportunity to fill more revenue-producing seats. Too large an airplane, you could risk flying around half-empty planes, burning fuel, and losing money, and lots of it.

Getting this balancing act is imperative to ensure your business plan's economics are correct. Your airline is financially viable so that your airline’s survival is assured, at least in the initial startup phase. Again, aircraft manufacturers' marketing departments will be all too eager to assist you in this process if there might be an aircraft sale or two for them!

The fourth stage of planning - Why?

Starting an airline is not easy; otherwise, everyone would be doing it, right? Going into the startup process thinking your airline will be flying before you know it would be foolhardy and misguided. You should give a great deal of consideration to why you wish to do this.

Why do you want to put yourself through months, if not years, of stress just to get to your airline's inaugural flight, let alone what may come afterward? Starting an airline simply as a vanity project has been repeatedly shown to be not enough reason to build a sustainable business.

You will need a good degree of passion, enthusiasm, resilience, and ambition to make this all come together. Starting an airline for fun is not a ‘thing’ in itself. You may have good intentions, grand designs, and enormous ambitions for your airline. Still, without established motives and deeply embedded aspirations, you may as well stop planning before you even get started.

And to address the 'elephant in the room' when it comes to airline startups, don’t expect to run a profitable business for several years at the very least . The startup costs involved in getting a new startup airline flying are far more considerable than even your forecasts will tell you. You need to make provision for this, given the multitude of setbacks that will undoubtedly come your way throughout the startup process.

As mentioned earlier in this article, If you are starting an airline simply to get rich quickly, you seriously need to rethink your whole ethos.

Failing to plan is planning to fail

Without comprehensive and credible plans in place, you are setting yourself up for a rapid fall. Any cracks in your business plan will quickly widen, be stretched to critical levels, and may simply just bring your whole project crumbling down before you even get going.

Yet, knowing what you want to do, where you intend to do it, how you intend to achieve it, and perhaps most importantly, why you are setting off on this arduous process and profoundly personal and life-changing journey will either attract investors to you or conversely confine your airline plans firmly to the drawing board.

Head in the air but feet on the ground

So, in summing up, be very clear about what you are aiming to achieve. Have big ideas and even bigger goals, but wherever your airline planning takes you, keeping your feet firmly on the ground will serve you well. Because remaining grounded throughout the planning process at all times, will hopefully ensure that your airline startup does not!

Next time, we shall look at airline funding and financing. Join us for 'How to Start An Airline: Part 3 - Finances', coming soon.

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Airline Business Plan

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Trucking business plan sample, auto repair shop business plan sample, freight brokerage business plan.

Click here to view this full business plan

Executive Summary

Market factors favor inauguration of a new airline to meet the demand for additional, higher-quality passenger and cargo service linking Western Europe with the rapidly expanding markets of Southeastern Europe and Turkey, and linking Southeastern European destinations, via Western European hubs, to trans-Atlantic and global destinations.

This new airline will base its business and marketing strategies on achieving high, and profitable, load factors through absorption of unmet demand in three key air-traffic categories: unserved and under-served routes on which high unmet demand currently exists or can be readily developed; serving key niche markets where demand is either unmet or poorly served; and meeting peak traffic demands on certain key regional, seasonal, and variable routes where very high load factors can be predicted despite existing but lower-quality competition, or where competition cannot meet the demand.

In addition, the proposed new airline will be designed around, and operated utilizing, the most up-to-date electronic, informational, and aviation technologies to ensure low operating and marketing costs, maximum efficiency in deployment of its resources, and a high level of customer service and convenience. And it is this final element – dedicating the airline, its staff, and its organization to providing a high level of customer service and convenience, and efficiently meeting the needs, wants, comfort, and safety of the passenger – that will assure the proposed airline’s rapid acceptance in the marketplace and its long-term growth and success.

Particularly in the post-09/11/01 environment, experience in Europe has shown that those carriers which can maintain a “mean-and-lean” operation while still meeting the needs and desires of the traveling public, with the right fares, will not only survive, but can prosper.

The six key characteristics leading to the success and profitability of this new carrier will be:

• Provision of high-quality service on routes and in markets that currently are either unserved, poorly served, or under-subscribed by existing carriers, thereby setting both a new trend and a new pace in air service to and within the Southeastern European region.
• Employment of cost-effective, up-to-date regional aircraft that will be sized right for the market and the route, leading to higher load factors, reduced costs, improved efficiency and flexibility, greater passenger comfort and satisfaction, and higher net profits. Outfitting these aircraft with the latest aviation technologies and navigational equipment will help ensure the highest level of reliability, punctuality, safety, and customer satisfaction.
• Utilization of the latest electronic and informational technologies in sales and marketing; reservations, ticketing and check-in; scheduling and resource planning; cargo tracking; and operational oversight. Such techniques as internet marketing, reservations, and sales; electronic ticketing and check-in; online quality control, resource planning, operational oversight, cargo and baggage tracking, and customer service, all will reduce staffing requirements while offering ease-of-use and greatly enhanced access by, and convenience to, the customer.
• Recognition that not everyone is geared for the electronic world, leading the proposed airline to provide a high level of non-electronic service as well, particularly to the many newer, less-experienced travelers – but future loyal customers – found in the region.
• Ensuring a friendly, cooperative, enjoyable, yet highly professional face to the customer.
• Development and implementation of cooperations, associations, and partnerships with other larger, more established, and highly regarded airlines both within and beyond the region to provide an extensive range of connections, through fares, frequent-flyer mileage sharing, and other passenger and client advantages through interline arrangements, code shares, common hubbing, and so forth.

In short, the goal of this new airline is to be known to the passenger and the cargo customer by its proposed motto: “We’ve got a job to do, and we do it every day – for you!” A key element contributing to the success of this new carrier will be its organizational and management team. Leading this team is Balkan Consortium Holdings USA, Inc. (BalkConsort), a U.S. corporation that is regionally based in Southeast Europe and which knows the region and its business needs. BalkConsort, together with its partner companies and associations throughout the countries of Southeast Europe and beyond, identifies business and profit opportunities and develops projects and strategic partnerships to implement and benefit from them.

As explained in the Company Summary that follows later in this business plan, BalkConsort USA’s interest and ownership in the proposed airline will transfer first to a new off-shore holding company, BC Holdings International Ltd, and then to a daughter company registered in a member state of the European Union (“BalkConsort EU”), both of which will be established prior to the airline’s start-up. Due to current European Union requirements that E.U. nationals hold the majority interest in an E.U.-flagged carrier, and the importance of an E.U. air operators certificate (AOC) to the new airline’s overall business plan, a majority ownership stake in the new airline, either directly or through “BC Holdings EU,” must be by E.U. nationals.

Joining the BalkConsort USA/BC Holdings International team are aviation, finance, and marketing experts with long and successful track records, including extensive experience organizing and managing other start-up airlines of both a regional and global scope. This organizational and management team, which is described in greater detail in the section of the business plan dealing with the Management Team, will help reduce the risk and ensure the success of the proposed new carrier.

1.1 Objectives

The proposed airline will have as its primary objectives the following elements:

• To establish and operate a new regional airline aiming specifically at linking Western Europe with the rapidly expanding markets of Southeastern Europe and Turkey, and linking Southeastern European destinations, via Western European hubs, to trans-Atlantic and global destinations.
• To provide service and absorb unmet demand in three key traffic categories: unserved and under-served routes on which high demand currently exists or can be developed; serving key niche markets where demand is either unmet or poorly served; and meeting peak traffic demands on certain key regional, seasonal, and variable routes where very high load factors can be predicted despite existing, but lower-quality, competition.
• To implement an organizational and marketing strategy that will, beginning in the first year of flight operations, achieve average passenger load factors in the 65-85 percent range, depending on route and season, and increasing thereafter to the 75-90 percent range, thereby maximizing revenues and return on investment while minimizing risk.
• To achieve revenues in excess of [XYZ] million USD per quarter within the first six months of flight operations, and exceeding [XYZ] million USD per quarter, by the end of the first year.
• To achieve net operating profits in the [XYZ] percent range within the first 12 months of flight operations, an annualized return-on-investment of approximately [XYZ] percent by the end of the second year of operations, and steady growth enabling rational expansion of the airline thereafter.
• To achieve the projected results starting with three mid-to-large-size regional aircraft, growing to five by the end of the first year of operations, similar to the 99-passenger British Aerospace Avro RJ100 or 85 – 99-seat Avro RJ85 regional jet aircraft, obtained on either a dry-lease or purchase basis; supplementing those aircraft with larger, longer-range passenger aircraft and cargo liners on a charter or wet-lease basis to serve peak-demand and intermittent routes and periods, as well as cargo demands, as called for by the business plan; and incrementally expanding the fleet size and scope on a dry-lease or purchase basis to at least double its initial capacity by the beginning of the third year of operations to accommodate projected passenger and cargo growth in the business plan’s out-years.
• To gear operations, and present a professional, serious, growth-oriented image from the outset, that will set the stage for reasoned, planned expansion, mirroring growth rates projected for the first year of operations, and that will enable the airline to extend its regional scope and, in future years, to transition from its initial regional status into a larger continental and intercontinental carrier.
• As an element critical to achieving the airline’s other key objectives, to identify and develop key interline alliances, cooperations, associations, and partnerships with other larger, more established, and highly regarded airlines both within and beyond the target region that will enable the proposed airline to provide an extensive range of connections, through fares, frequent-flyer mileage sharing, and other passenger and client advantages through interline arrangements, code shares, common hubbing, and so forth.

1.2 Mission

The proposed new airline’s mission, simply stated, is to fill a niche in the growing air-travel and cargo markets linking Western Europe, and points beyond, to Southeastern Europe and Turkey; to achieve high, and profitable, load factors by identifying and serving key routes and city pairs currently unserved, under-served, or poorly served, and where significant unmet demand exists; and to set a new standard for air service and professionalism both within the target market region and beyond.

By utilizing the latest aviation, electronic, and informational technologies, and by designing effective and efficient systems and building in quality control from the outset, we aim to ensure the highest level of service, operations, and safety, all based around the needs, wants, comfort, and convenience of the passenger and the cargo client. This combination of technology, service orientation, and quality oversight will help keep costs at a minimum and maximize profits to the airline and its investors. It also will help build the strong customer satisfaction and excellent reputation that will enable the airline to build solid, and crucially important, interline arrangements necessary to expand its scope and customer attraction in the early stages, and which will lead to continued long-term growth both within the target market area and, looking toward the future, beyond.

In short, this airline wants to be known by its proposed guiding motto: “We’ve got a job to do, and we do it every day – for you!”

1.3 Keys to Success

In descending order of importance, the five critical keys to success for the proposed new regional airline are:

• Employing an experienced, highly professional management team that combines vision; realism; financial ability; solid knowledge of the aviation business; familiarity with, and belief in, the utilization and benefits of the latest aviation, electronic, and informational technologies; on-the-ground knowledge of the region and markets to be served; realization of the crucial importance of an organization’s personnel to its success; and a total familiarity with, and commitment to, the overall mission and goals of the proposed new airline.
• Intelligent, progressive, and aggressive marketing that identifies the airline as a different kind of player, one that is sharper and smarter, and with a higher level of professionalism and operational standard than is the norm in the target region. Concentration on safety, with highly trained, dedicated, and professional personnel, caring for the passenger and the passenger’s needs and wants, the advantages offered by advanced technology, and straightforward, understandable, highly competitive tariffs and fare pricing, all will form key pillars of the marketing strategy.
• Identification, through careful market research, of unserved or under-served routes and city pairs in the target market area with sufficient passenger demand to enable high load factors and profitable operations utilizing the category of aircraft envisaged.
• Use of an all-jet fleet of newer, modern, Western-built regional aircraft that offer a high level of comfort, safety, and fuel and operational efficiency and flexibility, which meet all normal aviation standards, and which offer sufficient, but not excessive, passenger and cargo capacity on the envisaged routes.
• Use of advanced electronic and information technology to reduce staffing and other operational costs; expand the potential market base; readily capture sales opportunities; simplify and speed passenger, baggage, and cargo handling; and enhance customer convenience and satisfaction.

Additional important, though less critical, keys to assuring the airline’s success include the following:

• Identifying, negotiating, and entering into, in the pre-operational stage and early on, beneficial associations, cooperations, and partnerships with larger, more established, highly regarded carriers both within and beyond the target market region to offer interline arrangements, through fares, frequent-flyer mileage sharing, and convenient hubbing and long-distance onward connections to passengers. Successful execution of this element of the business plan is crucial to the overall success and growth of the airline, and must be kept in mind in the organizational plan and structuring of the airline.
• Establishing a high level of operational oversight and quality control that will ensure that the airline always lives up to its marketing commitments and fulfills the promise of a high level of service, customer satisfaction, convenience, and safety, at a reasonable, highly competitive fare.
• Avoiding the temptation to go head-to-head with established carriers on routes that already are well-served, unless solid evidence exists of additional, significant pent-up demand, or widespread customer dissatisfaction with existing services.
• Maintaining flexibility that enables the airline to always respond and adapt to changing market conditions and opportunities, without being erratic, and employing equipment, scheduling, and staffing on a basis that is sufficient to get the job done properly, efficiently, and at a high rate of return, without “overkill” or fielding costly excess capacity or, conversely, unduly cancelling scheduled flight operations.
• Identifying, developing, and quickly and cost-effectively exploiting opportunities for new markets, new market concepts, and expanded sales potential.
• Supplementing regularly scheduled passenger service with both regularly scheduled and also special cargo services when and where sufficient demand exists, and also with seasonal, peak-period, and other intermittent passenger services on certain key regional, seasonal, and variable routes where very high load factors can be predicted despite existing but lower-quality competition, or where competition cannot meet the demand. Larger, longer-range, or specialized aircraft may be employed on a charter or wet-lease basis to provide these supplemental, but potentially highly profitable, passenger and cargo services.
• Looking to combine the core aviation business with ancillary marketing concepts and activities and ground-based operations that support, supplement, and complement the aviation elements of the business, including such activities as package-, group-, and charter-travel program offerings; value-added sales and customer services, both land- and Internet-based; construction and operation of enhanced passenger-, baggage-, and cargo-handling facilities and services; and other logical business pursuits both within and outside the immediate aviation business.
• Avoiding growth for growth’s sake, and instead looking for solid niche-enlargement opportunities that will allow incremental, but always profitable, expansion.

Company Summary

The plan for the envisaged new regional airline is an outgrowth of the market research and regional experience of Balkan Consortium Holdings USA, Inc. (BalkConsort), garnered over a nearly three-year period, beginning in mid-1999. BalkConsort, which is proposing to found the new airline, is a U.S. corporation registered in the State of Delaware and headquartered in Chicago, Illinois, with a Southeastern European regional headquarters located in Panorama, just outside Thessaloniki, Greece. BalkConsort, together with its partner companies and associations throughout the countries of Southeast Europe and beyond, identifies key business and profit opportunities and develops projects and strategic partnerships to implement and benefit from them.

Early on following its establishment in the region in mid-1999, BalkConsort identified a growth opportunity in the aviation and travel sector in Southeast Europe. This opportunity is occasioned by growing economic, political, and social stability, and consequent significant business expansion, within and between most of the countries of the region; vastly expanded outside contact and support with and for the region, occasioned by the aftermath of the Bosnia and Kosovo conflicts; extensive UN, NATO, and other international-organization operations in the region; and such multilateral initiatives as the Stability Pact for Southeast Europe, the Southeast Europe Cooperative Initiative, and the Southern Balkan Initiative.

Additionally, the company has determined that maximum potential from this growth opportunity can be obtained not only by linking certain key destinations within the Southeast European region, but by linking the region with carefully selected destinations in Western Europe and beyond. It further has identified significant unmet demand, and significant short-, medium-, and long-term growth potential, represented by Turkey and the rapid growth of the Turkish economy and its domestic and international air-travel market, particularly in light of Turkey’s growing economic and political integration with the European Community and Europe as a whole.

Ancillary Travel Services In response to the growing travel-market potential of the region, represented in particular by the large expatriate community living and working in parts of the region, including Bosnia-Herzegovina, Kosovo, the Former Yugoslav Republic of Macedonia, and Albania, BalkConsort established Hassle-Free Holidays, a package-travel wholesaler and retailer, in mid-2000.

Both Hassle-Free Holidays and its partner organizations are expected to feed customers and traffic to the regional airline and utilize the airline’s services when possible, and will act as additional low-cost outlets for marketing the airline through their planned electronic-commerce websites. Locally established retail travel agencies can serve as a base for the airline’s sales and operations in the key niche market of Kosovo, and Hassle-Free Holidays already has established other close links with retail agencies in Skopje, Thessaloniki, and Athens, and is working on developing similar relationships with agencies in Istanbul, Ankara, Tirana, and elsewhere both within and outside the Southeast European region.

Other related company activities of BalkConsort BalkConsort currently maintains strategic partnerships or associations with companies in the following functional and geographic areas, all of which can serve to support, augment, or supplement the proposed new airline’s core aviation business:

• Construction, construction management, and construction technology (U.S., Greece, Turkey, Albania).
• Environmental engineering, including water and waste water treatment and solid-waste management (U.S., Italy).
• High-level security, demining, and explosive-ordnance removal (U.K.).
• Aviation services and airport development (Albania).
• Travel services and package travel development and marketing (Greece, FYRO Macedonia, Kosovo, global).
• Free trade zone development (U.S.).

The company owns 50 percent of a private U.S.-Albania joint venture limited-liability company, Rruget e Mira sh.p.k., founded in early 2001 and based in Tirana, Albania. The joint-venture company is set up to undertake primarily public road and street construction and reconstruction projects, as well as general construction and development projects, in Albania.

It also is considering tendering, either on its own or more likely in conjunction with a major international engineering and construction firm, for the build-operate-transfer (BOT) concession the Government of Albania will let for the planned new passenger terminal for Rinas (Tirana) International Airport. In addition, BalkConsort also holds exclusive license rights to two advanced U.S.-developed construction technologies in the 10 countries of Southeast Europe, including Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Greece, Macedonia, Slovenia, Romania, Turkey, and Yugoslavia (including Kosovo).

These technologies, combined with other building technologies, products, and methodologies the company and associated companies represent, can offer significant advantages to the new airline should it pursue, either on its own or in conjunction with BalkConsort, development and construction of new passenger-, baggage-, and cargo-handling facilities and other related installations.

Legal relationship and company status of the new airline BalkConsort intends to spin-off the proposed new airline operating company into a separate legal entity under the continued partial ownership and general oversight of BalkConsort, acting as a holding company. Investments in the new airline may be made either through BalkConsort, as a share of its total capital holdings, through an E.U.-based daughter company described later in this section that will be BalkConsort’s proxy for its interests in the new airline company, or directly into the new airline operating company.

To obtain maximum flexibility in terms of certification and flight and landing rights, it is important that the primary carrier operate under an air operator’s certificate (AOC) granted by an European Union country. Since current E.U. requirements stipulate that European Union nationals (companies and individuals) hold the majority ownership interest in any E.U.-flagged carrier, it is critical that overall ownership in the new airline be structured in such a way that the majority interest is held by E.U. nationals.

According to its overall organizational plan, BalkConsort anticipates reorganizing itself into an off-shore holding company (BC Holdings International Ltd), most likely registered in Anguilla, and transferring the current share ownership of Balkan Consortium Holdings USA, Inc. to the new off-shore holding company. BalkConsort USA will then become a daughter marketing company of BC Holdings International, with a majority of its shares owned by U.S. stockholders (necessary for it to fulfill its role as a U.S. marketing company capable of winning U.S. government contracts reserved for U.S.-owned companies), and a minority share owned by BC Holdings International as a holding company. The corporate organizational plan then calls for the establishment of a daughter marketing company in the E.U., similar to BalkConsort USA, to be held partly by BC Holdings International as minority shareholder and with a majority of ownership held by E.U. nationals. This daughter company (BalkConsort EU) may own all or part of the new airline operating company, provided that majority ownership in the airline meets E.U. requirements for an E.U.-flag carrier.

BalkConsort (in its new identity as BC Holdings International and as “BalkConsort EU”) anticipates maintaining or appointing positions on the new airline operating company’s board of directors proportional to its direct or indirect ownership interest in the airline, with other board positions held or named by other investors in the airline proportional to their ownership interests. Additionally, some board positions will be held by non-equity members, nominated by BalkConsort and the other investors and strategically selected by the board, whose presence and guidance can serve to advance the new airline’s operations, business interests, financial positioning, and expansion. It is anticipated that the new airline operating company will be established as a limited-liability company in one or more E.U. countries, the country or countries to be determined based on tax requirements and relative tax and business operating advantages, and other substantive considerations. For instance, registering and basing the company in Luxembourg may offer significant tax, as well as logistic, advantages to the new airline.

Meanwhile, it may be necessary to register a subsidiary company in another country, such as Switzerland for example, to obtain necessary landing rights or slots in that country. Furthermore, if – as is being considered and is detailed elsewhere in this business plan – the airline acquires British-built aircraft, it may be advantageous from the perspective of obtaining British export financing to base the company outside the U.K. Additional AOCs may be obtained by subsidiary carrier companies established outside the E.U. for substantive reasons such as outlined above. The final company structure, including ownership arrangements, national company registrations and AOCs, and basing, will be determined based on consultation and negotiation between BalkConsort and prospective investors, and with the expert guidance of its project team of tax, business, and aviation advisors and consultants, and others as may be needed.

2.1 Company Ownership

It is anticipated that a portion of the ownership in the new airline operating company will be held by BC Holdings International Ltd, most likely through an E.U.-registered daughter company, along with one or more strategic private investors. Investment in the new airline operating company may be made directly in the airline operating company or through investment in BC Holdings International or its E.U. daughter company as the holding company for the airline, with shares apportioned according to the equity investment involved. However, as previously stated, the majority ownership stake in the new airline must be held by E.U. nationals for the airline to qualify for an E.U. AOC, considered an essential element of the overall organizational plan. BalkConsort is prepared to discuss and negotiate specific ownership arrangements in detail with prospective investors. Equity requirements are discussed in the Start-up Summary that follows.

For planning purposes, any subsidiary airline companies established by the parent airline operating company, as described in the previous section, shall be considered to be wholly owned subsidiaries of the parent airline operating company, although individual sub-ownership arrangements may be made in individual cases of such subsidiary companies, particularly in cases where local ownership interests might be required by prevailing law in the countries in question. Balkan Consortium Holdings USA, Inc., the current entity formulating this proposal, is a privately held Delaware (U.S.A.) corporation. As noted in the previous section, a new off-shore holding company, BC Holdings International, Ltd., will be set up, with stock ownership in BalkConsort USA transferring to the new entity. It is anticipated that subsequently BC Holdings Ltd. will set up an E.U. daughter company which would then hold a share of the new airline, based on its relative stake in the airline.

2.3 Company Locations and Facilities

Financial, traffic, and other studies currently are underway to determine the optimal prime basing location for the proposed new airline. Among the locations under study are the following eight:

• Luxembourg, Luxembourg;
• Berlin, Germany;
• London City Airport, London, United Kingdom;
• Stanstead Airport, London, United Kingdom;
• EuroAirport, Basel/Mulhouse, Switzerland/France;
• Amsterdam, The Netherlands;
• Cologne/Bonn, Germany;
• Munich, Germany.

In selecting a location to base the new airline, the following 11 major considerations are being evaluated, in roughly descending order of relative weight:

• The tax and business regime in place in the selected locale. A low profit tax rate and a regulatory and political climate supportive of business, and particularly foreign investment, are key considerations.
• The availability of relatively low-cost facilities suitable for basing both the business and aircraft-support operations, as well as the aircraft, is another key consideration.
• The availability of sufficient landing and parking slots and gate facilities to permit the desired level of service at the base airport.The ability to interconnect with one or more major carriers for onward interline arrangements both within Europe as well as to trans-Atlantic and global destinations.
• A location that, given the maximum range of the selected aircraft, will enable non-stop flights to the most important destinations within the new airline’s service area in Southeastern Europe and Turkey and, at most, one-stop service to more distant or secondary destinations.
• The existence of relatively high-traffic volume between the base location and one or more key interchange points to provide sufficiently high load factors between the base location and onward destinations and points of origin.
• The existence of a reasonably high level of cargo traffic, including opportunities for interline trans-shipment of both inbound and outbound cargo.
• The support of a larger airline with which the proposed new airline can establish a particularly close working relationship.
• The support of local airport and aviation authorities to facilitate establishment, certification, and ongoing operation of the airline and its aircraft.
• A location outside of the U.K. to facilitate British trade finance on acquisition of the new aircraft, should decisions be made to acquire British-built Avro aircraft as previously noted, as well as to purchase, rather than lease, the aircraft.

A range of other factors, including the availability and cost of local skilled workers, the growth potential of the market selected, year-round climatic and weather conditions as they may affect flight operations, the “cache” of the locale for marketing purposes, the cost and convenience or difficulty involved in command and control of the airline involving key personnel, some of whom may be based at various other locations, and so forth.

It is anticipated that most routine maintenance will be performed at the base location, with some more minor maintenance and repairs relegated to other locations in the route network. In both cases, most of this routine maintenance and repair work will be contracted out to established and experienced service providers, reducing the need for the new airline to maintain its own extensive maintenance and repair teams and facilities. The airline will, however, perform its own normal line maintenance at home base and will utilize locally available services away from home. Aircraft also may be based at key airline hub locations away from the home business base as well. With acquisition of British-built aircraft, major overhauls and heavy maintenance may be performed at British Aerospace’s Woodford facility in the U.K. on a selective basis. In addition, it is anticipated that separate fixed-cost maintenance agreements will be entered into for both the airframes and the engines, or these elements will be included in any dry-leasing arrangements entered into.

Estimates for total labor and spare parts costs have been calculated as a fixed per-hour cost and included in the portion of this business plan dealing with anticipated operating costs. Sufficient apron and hangar space for staging, parking, and storing, as needed on a short-term basis, up to the entire initial five-aircraft fleet will be required at the base location and any other hub locations selected. As the fleet expands over time, additional parking and storage space will be needed either at the main base location or at regional hubs in the airline route network. Additionally, sufficient office space, preferably in one central location at or near the base airport, will be required to house the airline’s main administrative offices and its central reservations system. While the airline may consider establishing its own sales offices in key market locations, in general sales will be handled through a combination of Internet marketing utilizing the airline’s own website as well as other Internet travel websites, designated general sales agents in given locales, and regular travel agencies everywhere.

As demonstrated throughout this business plan, it is clear that a strong growth potential exists for the future, and the airline will gear itself toward sensible, well-based growth and solid financial and business planning. The proposed new airline has the potential to become a strong, well-established, and – as the numbers indicate – extremely profitable carrier, starting from now.

3.1 Service Description

In reviewing the planned services to be offered by the proposed new airline, this plan will divide services into two main categories: passenger services and cargo services. Within each category, the service strategy, as well as general services to be offered, are presented and reviewed.

3.2 Competitive Comparison

In comparing the proposed new airline to its competitors, there are at least two levels of comparison that must be considered; the usually lower-standard airlines, both scheduled and charter, flying out of the Southeastern European region, and the higher-standard, more highly regarded airlines operating out of Western Europe.

Beating the former source of competition is both a reasonable and an essential goal. But comparing favorably, and even standing notably above, the latter also is an important objective since these airlines will represent direct competition to the new airline on many of its projected key routes, despite efforts to avoid such competition to the extent feasible. Fortunately, several of the key distinguishing characteristics planned for the new carrier not only will enable it to fare extremely well in both levels of competitive comparison, but will actually be achievable at a savings in cost and resources. In other words, by being smart, the new airline can be significantly better than its competition while at the same time accruing lower overall costs, a remarkably good combination.

In comparing the proposed new carrier to both its Southeastern European and its Western European competition, it is important to look at those factors that determine how most travelers choose an airline. They include the following (and the order of importance is different for each traveler and each situation, but the most important factors are listed):

• Safety, actual and perceived;
• Cost, and range of fares offered;
• Destinations served;
• Availability of seats;
• Availability of fares;
• Convenience of flight schedules, times of arrivals and departures;
• Frequency of flights;
• Connections, including reliability and convenience of connections;
• Nature of flights: non-stop, direct, number of stops, aircraft changes;
• Availability of different classes of service;
• Onboard comfort, service, meals, and amenities;
• Type of aircraft, including jet or non-jet, size, and speed;
• Age and condition of aircraft;
• Ease and efficiency of reservations and ticketing;
• Reliability and on-time departures and arrivals;
• Ground service;
• Reliability and quality of baggage handling;
• Friendly, competent service in reservations, check-in, and in the air;
• Overall reputation of airline;
• Nationality of carrier;
• Factors of personal preference.

While no airline probably can excel in every one of these areas, the closer an airline comes to “excellent,” or at least “good,” ratings in each of these key areas, the better it will fare in its competitive standing. Both in the overall design of the airline and its basic operational features, as well as in its management, quality control, and day-to-day operations, the proposed airline is expected to stand out positively in almost every regard.

Competition with Southeastern European carriers While not all Southeastern European carriers fit the stereotype presented here, and several are in the process of privatization and ostensible upgrading, most do operate at a lower level of service than is customary in Western Europe. It is not uncommon for carriers in the region to operate older Soviet-built equipment (perceived to be less comfortable, less safe, and less reliable than its Western competition – perceptions that often are accurate).

For instance, such competing airlines as Avioimpex of the Former Yugoslav Republic of Macedonia, Albanian Airlines (Albania’s Kuwaiti-owned private carrier), ADA Air (a smaller private carrier in Albania with which BalkConsort has been partnered for certain purposes), Hemus Air and Bulgarian Airlines, both of Bulgaria, Tarom, Romania’s state carrier, and even Malev, the Hungarian airline, still operate Soviet-era aircraft in their fleets. In some cases, these aircraft are turbo-prop powered, and not pure jet. While often it is relatively inexpensive to lease such aircraft, their operating costs tend to be significantly higher than newer, more fuel-efficient Western-built aircraft, and their safety, reliability, and noise factors are often poor, in some cases limiting their ability to operate in some markets.

Service levels are poor in general, among both scheduled and charter carriers, which represent a significant part of the market, particularly in service to Kosovo and Turkey, the two niche markets identified for the new carrier. By utilizing modern, safe, reliable, and cost-effective Western-built regional jet aircraft, the proposed new airline will offer a far more attractive alternative to the traveler both from within and outside Southeast Europe, and will be able to operate with far lower fuel and maintenance costs than the competition. The comfort, reliability, speed, and safety of the new airline’s aircraft all will enable it to be the airline of preference for virtually all business, government, and organizational travelers from both within and outside the target region when traveling to or within the region, and it also will be preferred by most leisure and personal travelers, including those from with the target region, as well.

Greater reliability and punctuality of the aircraft, augmented by state-of-the-art navigational devices that permit operation under a wider range of weather and visibility conditions, will enable the airline to compete most favorably on those bases also, and will ensure the least likelihood of flight cancellations, postponements, and missed or late connections. On the basis of fares, the new airline will offer highly competitive fares which, in many cases, should be below those offered by its Southeastern European competition. Higher load factors, combined with greater efficiency both in operational costs as well as in reservations, ticketing, and check-in, will enable the new airline to be highly competitive from both a cost and a quality perspective, and will also enable it to retain a higher percentage of its revenues.

In short, the local competition, except in a few cases (such as Aegean/Cronus Airlines, and to a lesser extent Olympic Airways, from Greece; Adria from Slovenia; in some cases Malev, from Hungary; and the Turkish carriers) will not represent very strong competition to the new airline, and particularly in attracting the primary market groups at which the new carrier will be aimed. Finally, the new carrier will be seeking out, as part of its business and marketing strategies, routes and city pairs that offer unserved or under-served demand. That strategy also will help reduce the threat from competition, and will enable the carrier to further establish itself as the carrier of choice in Southeast Europe.

Competition with Western European carriers The competitive picture is somewhat different when Western European carriers represent the competition. Many of the new airline’s competitive advantages relative to Southeastern European carriers are erased or at least minimized.

In most cases, the new airline will be competing with other carriers operating aircraft of a similar nature. Safety, comfort, convenience, and reliability, as well as in many cases cost, all are on a similar footing. To stand out from the crowd, the airline must do things either differently or better, or both, than its competitors, and it is here that both the design and the management of the new airline must be at their sharpest. The competition in this region will include such well-established carriers as Swiss International, Austrian, Tyrolean, Lufthansa, KLM, British Airways, Air France, Alitalia, Sabena, and others of that nature. More recent, lower-cost, and “hipper” start-ups such as EasyJet, Go Fly, Bluebird, Virgin Express, and others like them will represent even more challenging competition in some cases.

But unlike any of its competitors, which may employ one or two or several elements of the proposed new airline’s marketing strategies, informational and electronic technologies, and management techniques, none of them – none – employ the full range of those elements that the proposed new airline will employ. Consequently, the proposed new airline will be the real equivalent of a whole new generation of airline (regional or beyond), and will represent the kind of revolution in the aviation world that Pan Am, Icelandic, Laker Air, PEOPLExpress, Virgin Air Atlantic, EasyJet, and Air Blue represented in their day (and in some cases, their “day” is still today).

In that regard, the new airline might well be known as “TechnoAir” given its extensive deployment of state-of-the-art marketing, reservations, ticketing, check-in, baggage- and cargo-tracking, and operational and safety technologies. The advantages of these technologies include a net cost saving to the airline, greater convenience and ease for the passenger, and an image and reputation that will cause the new airline to stand out from the pack. Combined with a staff and management that will be carefully recruited, selected, trained, and motivated to be the best of the best, and to be the most customer-oriented in the business, the new airline also will soon become known by its motto: “I’ve got a job to do, and I do it every day – for you!” In other key areas – routes, schedules, and fares – the new airline also will be carefully designed to either compete highly effectively or, alternatively, to go where the competition is limited or non-existent.

Requirements for interline arrangements In order for the new airline to be able to obtain the interline arrangements such as code-shares, interline fare agreements, frequent-flyer mileage sharing, and so forth, that will be so important to its competitive posture and overall success, it must:

• Fly Western-built aircraft, preferably pure jet.
• Meet the standards to have a two-letter airline code.
• Meet the highest standards for safety, reliability, and service.
• Be accessible through normal reservations and ticketing systems.

Meeting these requirements, and negotiating the desired agreements, will be priorities from the outset in setting up the new airline. Additionally, partnering and interline arrangements will be carefully identified and sought that will offer the new airline strategic partnerships that will help give it the “cover” of larger, more established carriers, and also the status and service and growth potentials it will need to grow beyond its initial stage and to become a true presence in the aviation world.

3.3 Fulfillment

The primary issue regarding sourcing is the question of the type and source of aircraft to be employed in the new airline’s fleet.

Aircraft selection Several potential fleet aircraft and manufacturing sources are being considered and evaluated, including the following:

• Airbus Industrie ATR72, A-300, A-310, A-320
• Boeing 717, 737-500, 737-700
• Bombardier Canadair Regional Jet CRJ
• British Aerospace BAe 146-300, BAe 146-200QC*, Avro RJ85, RJ100, RJX85, RJX100
• Embraer ERJ-145
• Also, in an all-freighter configuration, the BAe 146-200QT** and BAe 146-300QT**

* QC = “Quiet Convertible” version allowing quick-conversion from passenger to full-freighter configuration; only five of these – the complete production run – currently are in service worldwide. ** QT = “Quiet Trader” all freight version, of which in service there are 13 in the 200 version and 10 in the 300 version.

With the exception of the turboprops ATR72 and the Saab 2000, all aircraft under consideration are pure jets. Given the strong “jet preference” among the flying public (for instance, Continental Express in the U.S. estimated that its load factors increased 33 – 50 percent when it switched from turboprops to jet aircraft, and similar results have been documented elsewhere, including in Europe), the overall greater speed and reliability, reasonably close operating costs (especially given the additional flights that can be operated daily), and the longer range offered by jets, the preferred aircraft type is a pure jet. It remains only to decide which is the “right” pure jet for the fleet.

A number of key factors have mitigated toward the BAe Avro RJ family of regional jets rising toward the top of the list as the probable aircraft of choice for the new airline. Among those factors are the following:

• Relatively low per-seat acquisition cost.
• Relatively low per-passenger-mile costs, given their added capacity over smaller regional jets, and high reliability factors in the newer versions (for instance, Aegean/Cronus Airlines of Greece, which operates six RJ100s on a very active daily schedule, has averaged above 99.6 percent departure reliability with its RJ fleet).
• Complete pilot and maintenance intercompatibility between the various members of the family (RJ70, RJ85, RJ100, and now the new RJX family as well), giving added flexibility in flight and maintenance operations and reducing training and simulator costs.
• Four-engine configuration which gives it an added safety factor (while also increasing operating costs, however).
• Spacious, comfortable cabin interiors that offer the only seat, aisle, and overhead bin dimensions available in a regional jet that are equivalent to those on standard-size jets.
• The option of flexible cabin and seating configurations that allow for varying the number of seats provided for various classes depending on demand, the number of seats abreast, types of seat coverings, the number of seats provided on a given flight, and so forth.
• Availability of the aircraft from various sources on both lease and purchase bases.
• The possible option of obtaining advantageous British export financing.\
• Ability to service the aircraft in many locations on the projected service network and the availability of major overhaul capabilities at the manufacturer’s own facilities in the U.K.
• Widespread passenger and industry acceptance of the Avro regional jets both within and outside Europe.

Seating capacity is an important consideration both from the point-of-view of capacity, load factors, and per-passenger-mile costs, but also from the point-of-view of “scope clauses” in pilot union contracts. In Europe, any airliner with 100 or more seats falls under the far more highly compensated “mainline” airliner contracts in place in the industry. Planes with 99 and fewer seats are considered “regional airliners” for contract and union purposes, carrying more economical compensation packages. One approach worth considering is to commence operations with one generation of aircraft with an option to return those aircraft to the lessor or manufacturer without penalty in an “upward trade” to acquire the newer generation aircraft when they become available.

Such options are commonly supported by manufacturers in their effort to market newer generation aircraft, and would enable the new airline to avoid any delays that might ensue from backups in the RJX build pipeline. Given the new airline’s stress on technology and the comfort of the passenger, combined with the very real considerations of lower operating and maintenance costs and greater flexibility, consideration of the latest generation of aircraft should be evaluated carefully, along with limiting seating to five abreast, including in Value Class as described elsewhere in this plan. However, factors such as initial acquisition cost, refurbishing costs, operating and maintenance expenses, reliability, operating parameters, customer preference, and financing packages available for purchase or lease all must be considered.

For purposes of the costing factors utilized in this business plan, acquisition and operating costs for dry-leasing new Avro RJ100 aircraft with a high-level of technical features and passenger amenities have been employed, with a cost comparison also made for purchasing the same aircraft. Adjustments would need to be made for other aircraft types or ages and acquisition methods.

Aircraft acquisition Another issue still being evaluated and which will be decided is the question of how to acquire the aircraft. For a variety of reasons, including the ease with which the leases can be cancelled by the lessor and the lack of “ownership” of the aircraft, wet leasing has been ruled out except for short-term acquisition of aircraft that would be employed in meeting peak demand-type services as outlined elsewhere in this business plan.

The two remaining options both need to be examined from cost, flexibility, and finance points of view: Dry leasing the aircraft (generally on a five-year lease), or outright purchase. Both provide long-term control over the aircraft, and while both options tend to restrict changes in the fleet that might be preferred after the initial years of operation, market conditions and high demand for aircraft indicate that it would be relatively easy to be released from the leases, or to sell or lease the aircraft to new owners or operators, or to return them to their sources.

A number of leasing sources are available for the BAe Avro aircraft being considered, and some used aircraft also are available from time-to-time on the market from various sources. In addition, new aircraft can be acquired directly from the manufacturer on a variety of different plans and options, as well as used aircraft on occasion. Cost factors employed assume dry leasing of new Avro RJ100 aircraft in 99-seat configurations, with a comparison for purchasing. It is anticipated that finance guarantees up to 85 percent of the acquisition cost of the aircraft could be obtained from the Export Credit Guarantee Department of the United Kingdom (ECGD) for purchasing British-built aircraft exported from the UK.

3.4 Technology

Flight may be based on aerodynamics, but the proposed airline will be based on technology, and lots of it. Efficiency and convenience through use of the most up-to-date informational and electronic technologies, in addition to modern aviation and navigational technologies, are guiding principals of the proposed new airline. Technology will also be a cornerstone of the new airline’s marketing strategy.

Among the technological features the new airline will offer are:

• Internet marketing and online reservations (e-reservations) and sales (e-sales) that will provide quick and easy access to airline schedules, flight availability, reservations, and ticketing to a wide range of customers worldwide. This eliminates payment of agency commissions and keeps costs low – savings that can be passed on to the customer.
• Electronic ticketing (e-ticketing) which will enable passengers to obtain their tickets online and avoid the need to obtain paper tickets from airline offices, travel agencies, or at the airport. It also frees the airline from having to stock, track, and issue tickets and maintain paper trails of them. Again, more savings for both the airline and the customer.
• Electronic check-in (e-check-in) that will virtually eliminate waiting in line to check-in for e-ticketed passengers, enabling them to confirm their identities, obtain their boarding passes, and check-in their baggage (and even purchase tickets upon check-in) utilizing a user-friendly kiosk that eliminates those last-minute frustrating waits to get to the counter. And it also greatly reduces the airline’s needs to staff check-in desks, control long lines, employ local contract ground staff, and expend money and resources on an antiquated system that only adds to the traveler’s inconvenience and frustration. Another win-win situation for both airline and passenger.
• Electronic baggage tracking (e-baggage tracking) which will enable the airline to track any piece of baggage from check-in to final pick-up and claim. If courier services can track parcels as they move around the world, and enable customers to track their parcels using tracking numbers and online tracking systems, then why can’t the same system be used to assure that no passenger will ever again have to wonder where his or her baggage might be? There may still be contingencies (such as late check-in, lack of space, security restrictions, late connections, and so forth) that cause baggage not to be placed on a given aircraft, but at least both the airline and the customer can be assured that they both know exactly where the given item of baggage is at any moment, and when it might be expected to arrive at the destination. This could well be an exclusive feature of the proposed new airline since no other airline appears to be utilizing it at present.
• Electronic cargo tracking (e-cargo tracking) is the same basic idea as e-baggage tracking, and will use the same basic system, only for tracking cargo and parcels.
• Electronic quality control (e-QC) is another innovation that will enable technology to create a far better flying experience for the customer, give airline management and staff greater control over airline operations and performance, and save time, effort, money, and staff resources in the process. What is envisaged is a central electronic matrix that controls and monitors scheduling of aircraft, equipment, personnel, supplies, and support materiel, and responds to problems, excesses, and deficiencies.

It also will track all elements of a given passenger’s or customer’s transactions and interactions with the airline, from initial flight inquiry through reservations, ticketing, check-in, flight, connections, and final baggage pick-up, claim, and check-out, as well as any standing preferences, follow-up comments, inquiries, or problems. It also will monitor things like weather conditions, flight delays or projected delays, gate jam-ups, and other contingencies, and will automatically notify both appropriate airline personnel as well as passengers and customers of any advisories, warnings, or changes.

• Electronic financial control (e-finance) will enable complete electronic financial control and monitoring of the airline’s finances, clear advantages.
• Additional technological features will be incorporated on-board the aircraft to provide flight crews with the latest navigational and communication technologies to assure the highest level of passenger safety and also airline reliability and punctuality. Included in this technology, in the case of the Avro aircraft, is all-digital ARINC 700 avionics with advanced Cat IIIb low weather-minimal landing capability to permit landings under the poorest permissible approach and visibility conditions.

Market Analysis Summary

Economic growth and the requirements of redevelopment, not to mention the impending entry of several countries in the region to the European Union, are creating increased demand for air services between Western Europe and the countries of Southeast Europe and Turkey.

The market combines a variety of elements all of which demand a higher quality of air service than often currently available:

• Business travelers requiring convenience, reliability, speed, and schedules built around business needs.
• Government and international organization travelers, requiring the same elements.
• Personal and leisure travelers from the Southeast Europe/Turkey region who have the money to travel by air and who increasingly demand a higher level of service and convenience, but at an economical cost.
• The “Diaspora,” Personal and leisure travelers originally from the Southeast Europe/Turkey region, but now living and working in sizable numbers in the countries of Western Europe, with the same demands.
• Western European personal and leisure travelers, primarily traveling on the airline’s routes between Western European points.
• Seasonal (primarily summer, with some limited niche markets in the winter period) holiday travelers, primarily destined for Greece, Turkey, and the islands of the Mediterranean. Cost, reliability, convenience, and destination are their concerns.

The proposed new airline will appeal to all these distinct groups by offering better quality service (and in some cases, offering service where none now exists), at a higher level of safety, comfort, and convenience, and at reasonable fares, than currently available. The new airline also will focus on the niche markets identified in the Service Description section of this plan, enabling it to better serve and to become identified as the carrier of choice for those markets.

4.1 Market Segmentation

A complete market analysis and segmentation will require a specific passenger and destination survey, the cost of which is included in the Start-up Costs for the airline.

Preliminary analysis (based on a variety of methods, including observation, interviews with travel- and airline-industry professionals, economic segmentation, future projections based on marketing plans, and experience with the region and market) for planning purposes, however, indicates the following approximate market segmentation overall (considerable variations, of course, would be anticipated depending on route, season, and other factors):

• Business – 15%
• Government and International Organizations – 10%
• Regional Resident Personal and Leisure Travelers – 20%
• Diaspora Personal and Leisure Travelers – 10%
• Western European Personal and Leisure Travelers – 5%
• Seasonal Holiday Travelers – 10%*

* The seasonal/holiday travel segment of the market to some degree distorts the overall market percentages, but might initially be anticipated for two reasons: first, it compensates for the drop in business and government travel that can be expected during the peak summer holiday travel season; second, a significant portion of this traffic is likely to be carried on flights employing specially chartered or wet-leased supplemental aircraft.

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Regional Airline Business Plan

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Puddle Jumpers Airline

Executive summary executive summary is a brief introduction to your business plan. it describes your business, the problem that it solves, your target market, and financial highlights.">.

Puddle Jumpers Airlines, Inc. is a new consumer airline in its formative stages. It is being organized to take advantage of a specific gap in the short-haul domestic travel market. The gap exists in low cost service out of Anytown, U.S.A. The gap in the availability of low cost service in and out of the Anytown hub coupled with the demand for passenger travel on selected routes from Anytown indicates that a new entrant airline could be expected to capture a significant portion of current air travel business at that hub.

The management of Puddle Jumpers is experienced in airline start-ups. Previously management grew Private Jet Airlines from a single Boeing 727 to a fleet of 16 MD80 series aircraft. Revenues grew to $130 million in a two year period four years ago.

Our research and projections indicate that air travel to and from Anytown is sufficient to provide a new carrier with excellent revenues in its first full year of operations, utilizing six aircraft and selected short-haul routes. These sales figures are based upon load factors of only 55% in year one. Second year revenues are expected to more than doublewith additional aircraft and expanded routes. Load factors for year two are 62%. The Puddle Jumpers plan has the potential for a more rapid ramp-up than was the case with Private Jet due to the nature of the routes and the demand for travel currently in the targeted markets served. In short, the frequency of flights needed to serve Puddle Jumpers’s target market exceeds the demand that dictated Private Jet’s growth.

These sales levels will produce respectable net profit in the first operational year and exponential growth in flight-year two. Profits in year one will be a modest percent of sales and will improve steadily with the economies gained in year two. The over-all operational long term profit target will be 16% of sales as net profit in years four and five. The company’s long term plan is part of the due diligence package. The first operational year is actually fiscal year two in this plan.

The first year of formative operations will burn cash until revenue can commence. This is due to the organizational and regulatory obligations of a new air carrier. Investment activity is needed to handle the expenses of this phase of the business.

The following chart illustrates the over-all highlights of our business plan over the first three years. Gross Margin here is quite high since the only costs included in this calculation are travel agent commissions, credit card discounts, and federal excise taxes. Travel agent commissions are calculated on 30% of sales even though management feels the actual number will not exceed 10% of sales.

NOTE: For display purposes in this sample plan, numerical values in tables and charts are shown in thousands (000’s).

1.1 Objectives

The Company has the following objectives:

• To obtain required D.O.T. and F.A.A. certifications on or before month eight.
• To commence revenue service on or before the end of year one.
• To raise sufficient “seed” and “bridge” capital in a timely fashion to financially enable these objectives.
• To commence operations with two McDonnell-Douglas MD-80 series aircraft in month one, four by end of month four, and six by end of month six of flight operations.
• To add one aircraft per month during year two for a total of 18 at year two end.

1.2 Mission

Puddle Jumpers International Airlines, Inc. has a mission to provide safe, efficient, low-cost consumer air travel service. Our service will emphasize safety as its highest priority. We will operate the newest and best maintained aircraft available. We will never skimp on maintenance in any fashion whatsoever. We will strive to operate our flights on time. We will provide friendly and courteous “no frill” service.

1.3 Keys to Success

The keys to success are:

• Obtaining the required governmental approvals.
• Securing financing.
• Experienced management. (Already in place).
• Marketing; either dealing with channel problems and barriers to entry; or solving problems with major advertising and promotion budgets. Targeted market share must be achieved even amidst expected competition.
• Product quality. Always with safety foremost.
• Services delivered on time, costs controlled, marketing budgets managed. There is a temptation to fix on growth at the expense of profits. Also, rapid growth will be curtailed in order to keep maintenance standards both strict and measurable.
• Cost control. The over-all cost per ASM (available seat mile) is pegged at 7.0 cents or less in 1996 dollars. This ASM factor places Puddle Jumpers in a grouping of the lowest four in the airline industry within the short-haul market. (US Air, the dominate carrier in the Anytown market, averages 12.0 cents per ASM by comparison). The only three airlines with lower operating costs also operate older and less reliable equipment, and even then the lowest short-haul cost in the airline industry is currently Southwest at 6.43 cents per ASM.

Company Summary company overview ) is an overview of the most important points about your company—your history, management team, location, mission statement and legal structure.">

Puddle Jumpers International Airlines is being formed in July, 1996 as a South State Corporation. Its offices will be in Anytown. The founder of Puddle Jumpers is Kenneth D. Smith. Mr. Smith has extensive experience in consumer aviation. His bio as well as the backgrounds of all the members of Puddle Jumpers’s management team are enclosed herein.*

* Confidential and Proprietary information has been removed from this sample plan .

2.1 Company Ownership

Puddle Jumpers International Airlines, Inc. will authorize 20,000,000 shares of common stock. 1,000,000 shares are to be set aside as founder’s stock to be divided among key management personnel. It is also expected that management stock options will be made available to key management personnel after operations commence. It is expected that founders stock plus option stock will not total more than 15% of authorized shares.

Initial “seed” capital is to be attracted via a convertible debenture sold by Private Placement. This round of funding will have premium conversion privileges vs. later rounds and “bridge” capital. The company has plans to proceed to a public offering prior to initiating revenue service. The expected proceeds from the Private Placement are expected to be $300,000 at “seed” stage, $3.5 million in “bridge” funding and $10 million in I.P.O. proceeds (projected at $6 per share). Management cannot assure that an I.P.O. will be available at the time desired and at the price sought.

A sample of the offering proposed for “seed” investment is included with this plan.

2.2 Start-up Summary

In the second year of operations, Puddle Jumpers will expand revenue by adding flights to the most demanded and popular routes in current operation. This will serve to make our schedule the most convenient to these destinations, improving further our competitive advantage. The routes expected to be expanded first include Chicago, New York, and Anytown. Second level expansions would included Philadelphia, Dallas, Washington DC, Orlando and Detroit.

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2.3 Company Locations and Facilities

Management plans to lease a small office in suburban Anytown immediately upon closing “seed” funding.

The following sections describe the description of service, competitive comparison, technology, fulfillment, and future services.

3.1 Service Description

Puddle Jumpers is in the business of providing low-cost, “discount” air travel to selected destinations from the Anytown, U.S.A. hub. The service approach is “no frills” with emphasis on safe, courteous handling of domestic regional passenger travel.

All consumer surveys still indicate that the air travel customer’s preference is for “low fares.” However, he or she is not willing to compromise on issues of safety or on-time performance. Customers will however, settle for lower levels of in-flight service in order to reduce the cost of travel.

Puddle Jumpers provides precisely the level of service today’s air travel passenger demands.

3.2 Competitive Comparison

The primary competition in the Anytown market is US Air. US Air accounts for 86% of the air travel volume in this market. This is as high a single market dominance that exists in any US market. Also, this results in the highest fares in the nation for travel in-and-out of Anytown. 0% of air travel is at discount fares in Anytown.

Puddle Jumpers feels that we can obtain a significant portion of this business. Our costs will be lower than US Air (7 cents per ASM vs. 12 cents per ASM). US Air is already in financial difficulty due to “sins of the past.” Our costs will be significantly lower than “major” carriers such as Delta. This identifies a gap for only a “hub-based” short haul carrier in the Anytown market.

Operation of a single type of aircraft will have significant cost, maintenance, and training expense reduction.

Our aircraft will operate out of this single hub with high utilization based on price advantage. We will have an over-all competitive advantage since we don’t have aircraft or operations outside of our limited focus. Other airlines must maintain “system-wide” load factors and utilization, while Puddle Jumpers will operate profitably within our “niche” market. This will serve as a barrier to entry from other competitors once we are entrenched. It is unlikely that larger airlines will be able to compete with our low fares nor will they have the desire as they focus on more profitable “long-haul” routes with larger airplanes.

Puddle Jumpers will achieve its target of 7 cents or less per available seat mile by a combination of cost saving measures. Savings will come in the areas of labor costs and from operational economies. Puddle Jumpers will utilize its flight crews significantly more than its competition. Flight crew utilization will be 60% above industry average. Both pilots and flight attendants will be deployed an average of 85 hours per month vs. an industry average of 50-60 hours. The company will realize additional savings in the insurance and benefits areas by virtue of having fewer crew members.

Eliminating meal service in-flight will save approximately $3.00 per seat per flight. This will also increase airplane utilization due to no need for catering service while in port. It is Puddle Jumpers’s goal to utilize its fleet an average of 11 hours per day, 7 days per week.

All aircraft will be configured to a single coach seating capacity of 165 seats. This will maximize revenue on short-haul flights. MD-80 series will be the only aircraft operated by the company. We will eliminate the need to cross-train employees. We will also reduce the requirements for parts inventories.

Our state-of-the-art reservations system will save time, allow us to employ fewer reservationists, and save training costs for new reservation personnel. The reservations system is discussed further in the “Technology” section of this plan.

3.3 Sales Literature

All company literature is yet to be developed. This includes basic corporate identity material as well as advertising executions. First year projections include an expense item for this necessary development work.

3.4 Fulfillment

Aircraft will be obtained on a “dry lease” basis (without fuel) from one of several aircraft lessors at an approximate cost of $165,000 per month. Puddle Jumpers management has already been in contact with GE Capital Aviation Services. It is expected that GE Capital will have 80 MD 80 and/or MD 81 aircraft available for lease from Swiss Air over the next several years. Lease deposits, requirements and terms are as follows:

Generally, first and last month’s lease payments are required in advance. Lease is usually a five-year operating lease and most often qualifies as an expense item to the lessee. Terms of renewal are negotiable and no buy-out provision is included. There may or may not be an additional deposit required by the lessor as a maintenance reserve. Puddle Jumpers management feels that this will not be a requirement but is prepared to make such a deposit if it becomes required to obtain necessary aircraft for operations.

It is expected that up to 80 airplanes will be available over the next two years with an average of 120 days lead time required.

The advantages of utilizing McDonnell-Douglas MD 80 series aircraft, in addition to management’s knowledge and prior successful experience with the same aircraft at Private Jet, are outlined in the “Technology” section of this plan.

Our reservations system will be obtained from CMS at a cost of $200,000 for the software license and approximately $1,000 each for 50 reservation stations (including modem and monitor). The advantages of this system are outlined in the “Technology” section of this plan.

Outsourcing of services are as follows:

Maintenance:

All regular “A” and “B” maintenance will be performed by Puddle Jumpers personnel at our own leased facilities at each airport served. We will also have tools and parts inventory at each site. Puddle Jumpers management feels that it is both necessary and prudent in today’s regulatory environment to perform this regular and routine maintenance “in house”. Periodic “C” and “D” overhauls and major maintenance will be outsourced to Aero Corp. in Lake City, Florida. Labor costs are budgeted at $32 per hour. It is common for many carriers in the aviation industry (including some quite large ones) to “sub-out” “C” and “D” scheduled maintenance. Thus, it is not viewed as a competitive or regulatory disadvantage to Puddle Jumpers to do likewise.

Ground Handling:

Airplane parking services, baggage loading and unloading, and baggage and freight handling services will be outsourced at all airports other than the Anytown hub where these services will be performed by Puddle Jumpers personnel.

Food Service:

All condiments and beverages served on Puddle Jumpers flights will be purchased from in-flight food service providers.

3.5 Technology

All equipment and systems that will be utilized by Puddle Jumpers have been carefully and diligently evaluated. Management feels that it is an advantage to be starting an airline today vs. using many of the systems that burden even the largest domestic carriers with extra cost due to outmoded technology. The technological advantages to management’s choices are outlined below:

Airplane advantages:

In addition, the utilization of MD-80 series aircraft will avoid additional FAA compliance requirements mandated by the “Aging Fleet Program”. These requirements apply to aircraft 20 years older or more. Since most aircraft to be used by Puddle Jumpers were built in the 1982 to 1985 time frame they will not be subject to these mandates during the full initial five year term of their respective leases. Many Value Jet airplanes, by contrast, were built in the early 1970’s.

Since these aircraft were built in the 1980’s parts are still being manufactured and are readily available. Older aircraft often dictate that parts that are no longer manufactured are “cannibalized” from one aircraft to another or that old parts are “remanufactured” since new ones are non-existent. The safety risks are evident. Puddle Jumpers will be able to maintain an inventory of new replacement parts.

Perhaps most importantly, the MD-80 series aircraft is already “Stage 3” noise compliant. New FAA guidelines mandate that 50% of an airline’s fleet meet new noise emission standards by Dec. 31, 1996. Another 25% must qualify by Dec. 31, 1998 and the entire fleet must be in noise standards compliance by Dec. 31, 2000. Several domestic air carriers are already protesting that they can’t reasonably meet these standards but the FAA has demonstrated a past history of not bending on similar issues. Puddle Jumpers’s fleet will not be effected by these requirements since it will comply as soon as it begins flying. There will be no cost to upgrade or retro-fit required. Again, this fits Puddle Jumpers’s philosophy that the cheapest way to maintain aircraft is to adopt a “preventative” overview. All of the cost savings associated with the utilization of this superior aircraft are reflected in management’s projections.

Finally, management is well acquainted with all facets of operation of the MD-80 from prior experience at Private Jet. Such experience was completely satisfactory.

Reservations advantages:

The predominate reservations systems in the airline industry today, “Sabre” and “Apollo” are outmoded and obsolete. The major carriers are slow to change because of the huge capital requirement to “roll over” their entire reservations system at one time. Hence, they keep going with the old and outdated.

The CMS reservations system that Puddle Jumpers will use has three main advantages that all contribute to cost savings: 1) Speed, 2) Learning Curve, and 3) Integration. Since today’s PC’s operate so much faster than earlier versions Puddle Jumpers’s reservationists will be able to complete a typical reservation procedure up to 75% faster than industry averages. Most reservations will be completed in two minutes or less (as opposed to the frequent 8 to 10 minutes that almost everyone has experienced from time to time). The system simply searches and retrieves data so much faster. The result is not only higher levels of customer satisfaction but also substantial savings in communications cost to Puddle Jumpers.

Training costs are also reduced exponentially. There is characteristically high turnover among airline reservationists. “Sabre” and “Apollo” take two weeks to learn and master. Puddle Jumpers’s use of CMS will enable a basic computer literate employee to learn the system in only one day.

The CMS system also seamlessly integrates with other management information systems used by Puddle Jumpers. It is also designed to operate in a “ticketless” environment, something the other systems have difficulty accomplishing.

Operational advantages:

Over-all operations will be seamless from area-to-area of Puddle Jumpers’s management information systems as a whole. Most systems utilized by the major carriers today were put in place more than 20 years ago. Thus, there is a constant need for each operational area to “talk” or “re-transmit” essential data to one and other. Not only will Puddle Jumpers’s information systems operate “seamlessly” but they will also greatly enhance the ability to conform to all FAA compliance requirements. The biggest and toughest compliance issue facing carriers today is “record keeping.” It is not enough to comply, but one must be able to PROVE compliance as well as have full and clearly defined and documented internal accountability.

3.6 Future Services

Service will be one-class with all aircraft configured for a seating capacity of 165. Travel will be ticketless. Reservations will be handled predominately by our own reservation system (even though we’ve budgeted travel agent commissions on 30% of sales). In-flight service will be on a pay-on-demand basis. Paid service will be for alcoholic beverages only. No meals will be served on these short-haul flights. A snack of soft drinks and peanuts will be included in the fare structure. Seating will be open with no reserved seats. No frequent flyer or travel incentives will be offered.

Market Analysis Summary how to do a market analysis for your business plan.">

Anytown, U.S.A. is the best place in the continental United States to start an airline. Puddle Jumpers’s management decision to do just that is based upon extensive research compiled from The Department of Transportation O & D report data. This data provides a reliable source (based upon a compilation of actual airline arrivals and departures) of origination and destination demand by passenger, by day. The key measure of demand between any two given points in the grid is called “PDEW.” That is “passengers departed each way.” The PDEW compiles a total number of passengers on all carriers between two points, on average, each day. This total is irrespective of final destination.

The other keys factors that resulted in the choice of Anytown as a hub derive from management’s experience and knowledge in commercial aviation. Principal to the decision is an airline industry insider’s understanding of the problems that face US Air, the dominate carrier in the Anytown market. Also, the lack of availability of a true “discount” fare option to the Anytown traveler is pivotal.

Management is making the judgment that not only is the Anytown market vulnerable to a new carrier, but also that the ability of US Air to retaliate will be limited. Further, the likelihood of a major carrier to respond is unlikely. The only real threat would be another new entry. So the opportunity may best be described as one ready and waiting for the first entrant who arrives with a well conceived plan, sufficient industry experience, and with the required capitalization.

4.1 Market Segmentation

The airline industry is dominated by the major carriers. It is an industry characterized by merger, acquisition, and consolidation. Like so many other industries it has quickly evolved into an industry that has room only for major players and smaller “specialty” or “niche” participants. There are two specialty segments that have characteristically been exploited by new entrants. One is the “price” niche and the other is the “route” niche. One focuses on charging less, the other on providing either the only service between two given points (the “commuter” or “feeder” concept) or else superior or more convenient or less costly service between two heavily traveled destinations.

Short-haul carriers also may operate efficiently out of a single hub. This enables consolidation of services and economies of down-sized scale. At the same time, the revenues available from short hauls are comparatively higher than long hauls on a per-passenger-mile basis.

Short haul revenues are simultaneously high enough to build a substantial business in the hundred million dollar multiple range.

Thus Puddle Jumpers may be said to target the short-haul, single hub, discount fare market segment. This is a new segment defined by the demands of today’s traveler.

4.2 Service Business Analysis

The Federal Government de-regulated the airline industry in 1978. Prior to that time the government virtually guaranteed the profitability of the airline industry, at the expense of the consumer. Routes were restricted. Fares were fixed. Costs got out of control. Today some of the major carriers still continue to operate at less than optimum efficiency. This has spawned the success of various “discount” carriers, most notably Southwest, ValuJet, and the new U2 planned by UAL.

The low cost carriers have proven that they can operate profitably, can garner market share, and have even spawned an increase in travel by luring those who would previously have traveled by bus, rail, or automobile or who would not have traveled at all.

In 1994, ValuJet Airlines in Anytown experienced considerable success and enjoyed rapid growth. It has forced TWA to abandon its mini hub in Anytown and has grown to more than 40 aircraft in two years. Until recently, Anytown was the most expensive major city in the U.S. to fly to or from. This was due, in part, to the near monopoly condition engendered by Delta’s dominance of the Anytown market.

ValuJet remains the economic success model for start-up airlines, although Puddle Jumpers management feels that it should not be the operational model. ValuJet’s current problems are the result of unbridled growth without commensurate control.

Many major airlines today are experiencing significant losses. The management of Puddle Jumpers feels that these losses can be traced directly to the high cost of labor, operational inefficiency, and poor management. Management further believes that the major carriers cannot profitably compete against start-up carriers with limited and specific market focus and lower over-all cost structures.

In retrospect, de-regulation has succeeded in providing air travelers with better service but has not necessarily provided service at a lower price. In the recent times of financial trouble many airlines have complained of an under supply of air travelers, when in fact there is an under supply of affordable seats. It is Puddle Jumpers’s goal to provide these affordable seats while maintaining a profitable airline.

4.2.1 Distributing a Service

Sales of airline tickets have historically been either direct from the airline itself or through various travel agents. Modern computer technology and communications capability are changing the mix dramatically. Travel agents once accounted for 80% of ticket sales. This channel of distribution has been one of very high cost to the airlines. Travel agent commissions at one time became the highest individual cost item to an airline. Perks and incentives amounted to coercion and bribery. The airlines found themselves held hostage. Not until Delta boldly announced that commissions to travel agents would be held to 10% did the situation begin to change.

The physical cost of printing and distributing tickets is also substantial. Travel agents estimate that it costs them an average of $30 in total cost to originate an airline ticket. Many of them have begun to add their own service fees to the actual cost of a ticket.

Available technology has now afforded the opportunity both to sell one’s own tickets and to eliminate the physical ticket altogether. The critical element for both strategies to be successful for an airline is simply to create the demand for travel on one’s airline. If the airline makes it desirable for the consumer to want to fly it then it is just as easy to order tickets directly from the airline as it is from any other source. Puddle Jumpers will have fifty of its own reservations agents available via an 800 number (the service will be 24 hours from an available pool of 90 agents in total). In addition, we will have an Internet site where schedules are available and customers can book their own reservations and buy tickets via credit card.

Puddle Jumpers expects to sell as much as 90% of its air travel “direct” and “ticketless.” Even so, we have budgeted 30% of sales as subject to agent’s commission.

“Ticketless” travel has an additional advantage since Puddle Jumpers will not wait 30 days for collection of clearinghouse funds from other airlines on combined-carrier tickets. Also, it is not expected to be a competitive disadvantage for Puddle Jumpers’s passengers to connect to other airlines. They will want to fly Puddle Jumpers to available destinations to save money even if they need to buy a paper ticket on another airline. Puddle Jumpers flights will be listed in all available flight information systems.

4.2.2 Competition and Buying Patterns

The most critical factor for Puddle Jumpers or any new airline to overcome is the issue of brand awareness and name recognition. Customers prefer to fly with carriers they know and trust. There is little doubt that Puddle Jumpers will need to spend heavily and frequently to advertise and promote its product. The needed amounts are budgeted in this plan. The advantage is that local media can be utilized which is more cost effective on a per-impression basis. It can also be highly targeted. It has been proven in the past that market share can be achieved for a new airline.

Critical in today’s environment is safety. Consumers will switch for lower costs, but not at the expense of a perception of a safety risk, or not at the expense of expected on-time performance. Puddle Jumpers’s media executions will emphasize these two main themes.

In the Anytown market, Puddle Jumpers expects to appeal to a mix of business oriented travelers and personal travelers. One issue is whether or not “frequent flier miles” are needed to compete and sell tickets. Management feels they are not. Industry estimates show that as many as 10% of occupied seats on domestic flights are currently “no revenue” as a result of redemption of premiums earned. It is also very expensive for an airline to administer its frequent flyer program. Puddle Jumpers feels that our cost advantage in Anytown will outweigh the lack of “incentive” rewards. We expect that casual and personal travelers don’t fly often enough for “points” to be significant. At the same time Puddle Jumpers will initiate a concerted sales effort directly to all major corporations in the Anytown market. We hope to have business travel mandated by these corporations on a cost basis alone.

4.2.3 Main Competitors

The only significant competitor in the Anytown market is US Air. At one time Eastern and Piedmont dominated the market. Eastern went out and Piedmont was acquired by US Air. US Air is highly vulnerable because of its high operating costs. ASM short-haul cost of 12 cents is currently the highest in the US. US Air commands 86% of the Anytown air travel market. Delta is a distant second with 2%.

As a result, Anytown currently has the highest air travel costs in the country and 0% of air travel is at discount fares.

US Air’s problems can be traced to two main factors. The first is the fact that their growth strategy has been by acquisition. It is apparent that management paid too much for many small regional carriers and also that the consolidation of these carriers has not produced the operational cost advantages that were anticipated. Secondly, and most important, has been out-of-control labor costs. US Air’s stronghold is in the North East. The strongest labor unions are located in this part of the country and prior management has been completely ineffective in obtaining any concessions from these unions.

In spite of high costs, US Air has grown to become the nation’s sixth largest carrier. However, recent press articles indicate a large measure of uncertainty in their future path. Berkshire Hathaway has asked US Air to buy back its 10% stake in the airline. Stephen Wolf, US Air’s new chairman has stated that US Air needs to become a carrier “of choice” not merely “of convenience.” He said further that US Air must either buy another airline, be acquired itself, or form a partnership with another carrier. The question is WHO? No one in the industry wants US Air’s high cost structure. And even if a new owner could obtain concessions, who’s current routes are compatible with US Air? The management of Puddle Jumpers cannot identify a strategic suitor. TWA or Continental would be the most likely to acquire US Air from an economic standpoint but the routes don’t match well.

Puddle Jumpers concludes that the Anytown opportunity is likely to be free from imposing competition unless it comes from another start-up. If we are able to attack the market first with sufficient capitalization, we feel we will be difficult to overcome and should be able to build critical mass within two years.

4.2.4 Business Participants

The major air carriers in the U.S. are not the focus of this plan. They are not viewed as competition to a single hub, short-haul, low cost entrant. The following three airlines are worthy of study. Southwest as one to emulate. ValuJet as one to improve upon. US Air as one to learn from and avoid similar pitfalls.

Southwest Airlines is the model for operating a safe and successful discount carrier. Even though Southwest has the lowest cost per ASM in the airline industry for short-haul carriers they have never experienced a fatal crash in more than 25 years of operation.

ValuJet remains the financial model for a start-up airline. The return to initial investors and early shareholders has been outstanding. However, operations have been marginal and growth was too fast.

US Air is the model for classically mismanaged labor cost within the airline industry. This plan focuses on a deeper discussion of US Air in the “Competition” section. US Air controls an 86% market share in Anytown. Delta is second with 2%.

Puddle Jumpers management has studied extensively the history of the above three airlines. All three have grown to substantial revenue size amidst the major airlines. None of the three existed in the not-too-distant past. Puddle Jumpers has taken the best parts of each growth story, heeded the alarms and cautions, and learned from the outright mistakes. The result is the plan for Puddle Jumpers Airlines, the airline for today’s marketplace.

Strategy and Implementation Summary

Puddle Jumpers’s market presence will be achieved by relying on the strategy of identifying and serving a specialized niche market well.

• Media executions will utilize local media, which is highly targeted and cost effective on a cost-per-impression basis.
• Air operations will be centralized and cost effective.
• Reservations will be centralized and cost effective.
• Marketing will be media generated to the leisure market and combined media/direct sales generated to corporate accounts.

5.1 Marketing Strategy

Marketing is targeted locally. The advantage of a local and highly identifiable market is that media selections can be limited in scope. There is no need for a national media program to launch Puddle Jumpers. The most effective media is expected to be outdoor billboards. Private Jet relied heavily on a dozen well-placed billboards in and around its home hub to build a $100 million plus business.

Other media will be local spot TV on highly visible programs such as local news and sports. Also, local radio. Newspapers and other print will not be used.

5.1.1 Distribution Strategy

In addition to other marketing programs outlined the company will also market via the World Wide Web. We will establish our own website with reservation, purchase, and payment capability.

5.1.2 Pricing Strategy

Due to its low cost operating structure Puddle Jumpers will be able to offer service at less than 50% of the competitive airfares to our selected destinations from our Anytown hub. Projected fares are as follows:

The first column is for 14 day advance purchase. These fares are non-cancelable and non-refundable. The second column is for fares purchased inside of 14 days. The third column is current Day-of-Travel published average fare for all carriers.

5.1.3 Promotion Strategy

Promotion will be primarily outdoor advertising, radio and TV targeted at the Anytown business and leisure traveler.

In addition the company will employ a public relations firm for both consumer and financial purposes.

The combined amount budgeted for advertising, public relations, and reservations will be held under 15% of sales. Thus, the first year expenditure in these categories is expected to be $16.5 million. Past experience with Private Jet has demonstrated that this expenditure is sufficient to launch airline service in a single hub.

5.2 Sales Strategy

In order to attract the Anytown business traveler without the use of frequent flyer miles, the company will make direct sales contacts with the travel departments of Anytown based corporations and businesses. It is expected that our cost structure will be attractive to these businesses. Anytown is now the third largest banking center in the U.S. and the Anytown area economy in general is growing faster that the national average. We expect business travel to amount to at least 50% of our over-all revenue.

The sales personnel and salaries required to execute the direct sales strategy are included in these projections.

5.2.1 Sales Forecast

The company is forecasting very encouraging annual sales in year one of flight operations. Year two of flight operations sales are forecasted to more than double. Assumptions made for load factors are: 55% in year one, 62% in year two.

The year two numbers are based upon adding more flights and more airplanes to the routes already served. This will enable us to maximize profits within the market we have created without incurring the additional expense of opening new markets. It also allows for more controlled growth and eliminates the risks, early on, of the loss of control of operational procedures that can occur either with de-centralization or growth that is too rapid.

The basis of the sales projections illustrated in the table below have been outlined in the “Market Analysis” section of this plan.

The company has also prepared five-year projections that are based upon expanded service to additional market areas. This five year plan is a part of our due diligence package. Direct costs of sales are not included here but are instead reflected as a revenue discount in the projected P&L statement. These sales costs consist of travel agent commissions, credit card discounts, and federal excise taxes.

5.3 Milestones

The following table lists important program milestones, with dates and managers in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation.

Management expects that the current regulatory climate will loosen shortly. We expect it to be a long-term advantage to well operated airlines. We feel that 1996 is the ideal time both to invest and to start an airline.

The costs of adding airplanes are figured on the basis of first and last payment in advance + one month’s lease payment.

Management Summary management summary will include information about who's on your team and why they're the right people for the job, as well as your future hiring plans.">

The management of Puddle Jumpers is highly experienced. There is no one on the management team who has not already performed his or her function for another airline. We are not in the business of training key people. We intend to hit the ground running with a highly qualified and experienced management team. Some of the individuals profiled are currently with other airline companies. They both know and respect Ken Smith and have expressed the desire to work for him and for Puddle Jumpers.

Ken Smith is both known and respected by the F.A.A. regional officers in Anytown as well as at the Federal level in Washington. He enjoys similar status with key D.O.T. officers. The management of Puddle Jumpers is well versed in all governmental approval procedures, having traversed them in the past to a full approval and operational status. We feel that the resumes of the key people enclosed herein will only enhance our ability to obtain required approvals. It is expected to be a necessity from this point forward to have such a management team assembled in order to obtain the government charters from the D.O.T. and from the F.A.A.

The bios of the management team follow.

6.1 Organizational Structure

The company will be organized into five major operational areas:

• Flight Operations.
• Maintenance.
• Customer Service.

Many of the specific positions and job descriptions are government mandated. Puddle Jumpers will fully comply with all such mandates.

6.2 Management Team

The following are the bios and ages of the key members of Puddle Jumpers’s management team:

KENNETH D. SMITH, President & CEO, 51

Ken Smith has 28 years of aviation experience beginning with his career in the U.S. Air Force, where he ultimately attained the rank of Captain. Ken was awarded the Distinguished Flying Cross, two Commendation Medals, and six Air Medals for his contributions as a pilot in the Vietnam War. When Ken left the Air Force in 1976 he was the Director of Flight Training Programs at the U.S. Air Force Academy in Colorado Springs. He has served as Chief Flight Instructor for Flight International Training School and as a pilot for Braniff Airlines. Ken then served as Executive Vice President and General Manager for Aerostar Airlines, leading a turn-around that enabled Aerostar to be acquired by Flight International in 1984.

Ken then became General Manager of Connie Jones Services, an air cargo airline which he expanded from five to twenty aircraft. He was then recruited by Aero Corporation where he became Vice President of Marketing for Aero’s worldwide aircraft maintenance services.

Ken became President and CEO of Private Jet in January 1991. In less than two years Ken’s leadership took Private Jet from a single aircraft to a fleet of 15 and revenue of more than $130 million dollars.

Ken then helped Eagle Airlines start-up and has also served as a consultant to the start-up of Nations Air.

JAMES B. JONES, Executive Vice President, 49

Mr. Jones has thirty years of flying experience including distinguished military service. He has been chief pilot, Director of Operations, and General Manager of Air Nevada Airlines, a commuter carrier. He has also served as Director of Operations and Director of Training for Eagle Airlines.

GREER CLARK, Vice President, Operations, 56

Mr. Clark has taken early retirement from Delta Airlines. He has since served as Chief Pilot for America International Airlines, and as Vice President, Operations for Private Jet and for Eagle Airlines. Currently, he is Manager, Flight Test for ValuJet.

DON ADAMS, Vice President, Maintenance, 47

Mr. Adams is an Aeronautical Engineer from Australia. He has served as Vice President of Ansett Airlines. He was Vice President of Technical Services for Intercredit Corporation, an aircraft leasing company. Currently, he is Vice President of Avitas, one of the world’s leading aviation consulting companies. He is presently on loan to the National Transportation Safety Board investigating the American Airlines B757 crash in Columbia.

BRUCE WING, Vice President, Finance, 50

Mr. Wing is a CPA who has been a Vice President with First Chicago Bank. He has previously served as CFO of United Express, the commuter division of United Airlines as well as CFO of Private Jet.

PAUL BERRY, Director of Operations, 57

Mr. Berry is a retired Air Force Colonel. Colonel Berry served as General Swartzkoph’s Tanker Task Force Commander for Desert Storm. Mr. Berry is currently Director of Operations at America International Airlines.

TERRY MCADAMS, Chief Pilot, 57

Mr. McAdams served as a pilot with Eastern Airlines for more than 25 years. He later served as Chief Pilot for Private Jet and is the Chief Pilot for ValuJet. Mr. McAdams is typed on the B727, DC-9, and MD-80 aircraft.

SALVATORE DIANGELO, Director of Maintenance, 41

Mr. Diangelo has been in aircraft maintenance in the military, at People’s Express Airlines, and at Continental Airlines. At Continental Mr. Diangelo was responsible for preparing the maintenance budget for the entire fleet. He has also served as Director of Maintenance for ValuJet.

CALVIN COBLE, Director of Quality Assurance, 42

Mr. Coble served his apprenticeship in the military. He is qualified as a Class III Inspector, which requires both extensive training and recommendation from his peers at the FAA. Mr. Coble has served as Director of Quality Assurance at Shannon Aerospace, a large maintenance facility operated by Lufthansa and Swiss Air in Shannon, Ireland.

JIM BEND, Director of Marketing, 49

Mr. Bend has over fifteen years as Regional Sales Manager for Eastern Airlines. He received numerous awards for his sales performance while at Eastern. He has also served as Director of Sales at Private Jet.

JUDY LAND, Director of Reservations, 38

Ms. Land has more than 10 years experience as Reservations Manager at Eastern Airlines. She has also helped with design and implementation of the reservations system at Private Jet and at World Technologies. She has received numerous awards for her motivational training seminars.

MARY ANN BENNETT, Director of In-flight Services, 43

Ms. Bennett served as a flight attendant at Eastern Airlines and went on to open her own travel agency. She joined Private Jet as a supervisor of flight attendants and was later promoted to Director.

6.3 Personnel Plan

The following table illustrates personnel needs and growth plans for both key executives and category needs by group. It is expected that all key executives will participate in the company’s stock option plan as well.

Financial Plan investor-ready personnel plan .">

Adequate financing is essential for a start-up airline. Our strategy remains a “seed” to “bridge” to “IPO” progression. This has served as a successful model for airline starts in the past. Because of the amount of capital required to start an airline management feels it is restricted to this funding path. Once four to six airplanes are up and flying the company can continue to operate profitably for an indefinite period of time in the event additional capital becomes unavailable on attractive terms.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table. They key underlying assumptions are:

• We assume a slow-growth economy, without major recession.
• We assume of course that there are no unforeseen changes in technology to make products immediately obsolete.
• We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.

7.2 Key Financial Indicators

In the airline business the most important measurements are cost per Available Seat Mile and the System Utilization Factor. If seat costs are kept below 7 cents and utilization is at 50% or better, the airline will operate profitably.

7.3 Break-even Analysis

When we take out all operational costs for flying aircraft and include only fixed overhead and aircraft leases the company can break even on the first six airplanes by maintaining sales just over $2 million per month or approximately $24 million in year one. This is less than 25% of our expected sales forecast but it indicates that the company could survive without adding planes and routes for an indeterminate period with load factors of less than 15%.

7.4 Projected Profit and Loss

Our profits improve from a low percent of sales in year one to a modest percent of sales in year two and are expected to peak at a respectable percentage in year three and thereafter. In gross numbers, we create healthy profit in the second operational year.

7.5 Projected Cash Flow

This business plan cash flows positively from the initial infusion of investment forward. It will continue to produce cash as long as sales targets are met. Borrowing may only be required if seasonal fluctuations occur or if expansion plans are further accelerated.

The chart below illustrates the accumulation of first year cash during formative stage.

7.6 Projected Balance Sheet

The projected balance sheet illustrates the growth of the net worth of the business and may also be utilized to estimate future stock values based upon industry multiples.

NOTE: For display purposes in this sample plan, numerical values in tables and charts are shown in thousands (000’s). 

7.7 Business Ratios

The important business measurement ratios are presented here based upon projections for Puddle Jumpers. Business ratios for the years of this plan are shown below. Industry profile ratios based on the NAICS code 481111, Scheduled Passenger Air Transportation, are shown for comparison.

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• Business Plans Handbook
• Business Plans - Volume 09
• Airline Company Business Plan

Airline Company

BUSINESS PLAN       SKYTRAILS AIRLINE, LTD.

London Stansted Airport London, United Kingdom

SkyTrails Airline plans to establish itself as a niche player in the long-haul market of business travel. By continuously focusing on the needs of the premium-class business traveller, SkyTrails will provide the best value proposition in the markets it serves. It will offer customers a compelling value proposition: a high level of service and comfort at 50 percent of the current published business-class fare.

EXECUTIVE SUMMARY

The company, regulatory environment, market analysis.

Having successfully raised £1.3 million from angel investors, SkyTrails is now looking to raise £25 million from investors who are interested in the opportunity presented by SkyTrails and believe in its growth potential. This is a unique opportunity to invest in a new concept in the aviation industry which offers attractive returns and a clear exit strategy in the public markets within 3 to 5 years.

SkyTrails' aim is to establish itself as a niche player in the long-haul market of business travel.

By continuously focusing on the needs of the premium-class business traveller, SkyTrails will provide the best value proposition in the markets it serves.

SkyTrails is the project name for a new airline company that will focus on single class long-haul scheduled flights. SkyTrails will capitalise on the widening gap in long-haul travel between business and economy class. Based at London Stansted Airport (STN), SkyTrails will initially focus on the busiest transatlantic route, London to New York, by offering a STN-JFK service. SkyTrails will operate Boeing 757-200 aircraft configured with 80 seats which will provide a very spacious and pleasant environment. The aircraft will be equipped with the latest technology in order to enable the business traveller to use his time efficiently while travelling. The company will start by leasing two aircraft and expand its fleet to 6 aircraft by the second year of operation.

SkyTrails will be a "business to business" airline and will focus exclusively on the premium/business segment of the market. It will offer customers a compelling value proposition: a high level of service and comfort at 50 percent of the current published business-class fare. SkyTrails will charge £1,800 for a roundtrip ticket as opposed to £3,580 (for companies with high volume demand, SkyTrails will offer further discounts down to £1,400 for bulk purchase). In addition to an attractive price, SkyTrails will offer passengers considerable time savings, convenience, and will focus on creating a lifestyle appeal.

The business model contemplated enables the company to reach a break-even point with 40 passengers per flight (50 percent load factor) which significantly reduces the risks associated with typical airlines that need a greater number of passengers to break-even. In many ways, the SkyTrails model replicates the benefits of the very successful regional jet model on a long-haul basis.

By the end of the fourth year SkyTrails will achieve sales of £218 million, EBITDAR of £72 million and net income after taxes of £32 million.

Market Potential

• The London-New York route is the busiest transatlantic route with over 3.8 million passengers carried in 1999. The Civil Aviation Authority (CAA) estimates that approximately 30 percent of passengers were business travellers (1.14 million passengers).
• In 1999, over 2.65 million passengers in Stansted's catchment area travelled to the USA. Given that no airline currently serves the North Atlantic route from Stansted, SkyTrails will be uniquely positioned to take advantage of the unserved demand that exists.
• Stansted is the fastest growing airport in Europe with 9.9 million passengers for 1999.It is the hub of low cost airlines Go Fly, Ryanair, and Buzz, all of which are experiencing tremendous growth and an increase in business travellers. They claim that as many as 40 percent of their passengers are travelling on business.
• Stansted benefits from an Open Skies Agreement with the USA. This enables SkyTrails to operate flights to any city in the USA without having to obtain special rights under the Bermuda II Bilateral Agreement which apply to Heathrow and Gatwick.
• SkyTrails has already obtained landing and takeoff slots at Stansted and JFK airports for its initial flights.
• Total traffic from U.K. airports to the USA amounted to 16.2 million passengers in 1999. After launching the JFK route, SkyTrails will then be able to expand by targeting other attractive markets in the USA (Boston, Chicago, Washington, D.C., etc.) as well as other continents depending on the regulatory environment. With a break-even point of 40 passengers per flight, SkyTrails will also be able to target medium and low density routes offering an enormous potential for growth and an important competitive advantage.

It is important to note that during the first 12 months the operations will be handled by TravelAir which has ETOPS certification, thus taking away much of the operational burden from SkyTrails' management and ensuring a timely launch.

Markus Friedman, Chairman CEO of EBEL Watches (1991-1999) CEO of CWS (1964-1991)

William Scott, Founder and Managing Director Assistant to CEO, Southern Winds (airline in Argentina) (1999) Associate, Global Transportation, Chase Manhattan Bank (1995-1998) M.B.A., Columbia Business School (2000)/B.Sc. Economics, London School of Economics (1995)

Frederick Rodmann, Finance Director Assistant General Manager, Pegasus Airline (1992-2000) Audit Senior, Price Waterhouse (1986-1992)

Joseph Orr, Corporate Sales Manager Airline Manager, Lastminute.com (2000) National Account Manager, Virgin Atlantic Airways (1994-2000)

Oleg Schweitz, Marketing Director Director of Marketing, Paramount Comedy Chanel (1997-2000) Brand Manager, AT&T Communications (1996-1997) Marketing Manager, Warner Bros. (1993-1996)

Ken Loman, Technical Director Technical General Manager, Accountable Manager, Qatar Airways (1997-98) Technical General Manager, Accountable Manager, CityFlyer Express (1991-97) Project/Development Engineer, Air Europe (1988-91)

Non-Executive Directors

John MacDonald (Founder/Chairman CityFlyer Express 1992-1998)

Ryan Roland (Professor, Columbia Business School)

Competition

The London-New York route is currently served by British Airways (11x/day), American Airlines (7x/day), Virgin Atlantic Airways (5x/day), United Airlines (4x/day), and Continental Airlines (2x/day). These airlines operate out of Heathrow and Gatwick with wide-body aircraft (B747s, B777s, B767s, A340s, A300s, DC-10s) in a two- or three-class configuration. British Airways has introduced a fourth class of service, World Traveller Plus, which is equivalent to Virgin's Premium Economy.

By targeting such a dense route, SkyTrails initial market share will not be significant enough to be considered as a threat by the major transatlantic carriers. Existing players will only be able to react with price which is only one aspect of the SkyTrails concept and by no means the most important.

Key Success Factors

SkyTrails believes that the following factors will be key to the company's success:

Management and Culture SkyTrails has hired experienced airline professionals in order to ensure the operations are well managed. Blending experienced airline professionals with a young creative management team will be a successful combination which will continuously look for innovation while maintaining a high level of professionalism. Getting the right combination will be key in executing this venture successfully. The company will also focus on building a strong corporate culture that will help to differentiate itself from the competition and sustain a high level of motivation while maintaining cost control. More than just an airline, a lifestyle SkyTrails will differentiate itself as much as possible from the traditional airlines. SkyTrails will be to the airline industry what the boutique hotels (Royalton, W Hotel, Mercer Hotel, etc.) are to the hotel industry. Passengers flying on SkyTrails will identify to a lifestyle. SkyTrails has hired industrial designer Ric Sloan to work on the interior of the aircraft. Ric Sloan is one of the leading contemporary industrial designers and is viewed by many as one of the world's most fashionable. Superior Product and Service With an 80-passenger configuration, the cabin of the Boeing 757 will look more like a private jet than like a large mass transportation aircraft. Boarding and disembarking will be much faster given the low number of passengers. SkyTrails will reduce the overall travelling time by at least 1 hour and 30 minutes for passengers flying to and from the city of London, Canary Wharf, and the fast growing Cambridge area. Providing a personalized and comfortable experience is key in retaining customers and getting repeat business. A strong emphasis will be placed on this aspect of the business: particular attention will be paid to the design of the cabin, the technology available, efficiency of processes, and quality of service offered by the cabin crew. SkyTrails will continuously innovate and have the ability to introduce new products to market in a shorter timeframe than its competitors. Strong Sales team SkyTrails will market its services to companies directly. Its ability to acquire corporate clients will be extremely important to the success of the venture. SkyTrails will offer discounts for volume travel and will also partner with select hotels in order to offer all-in packages. Low Cost Operation As a new airline, SkyTrails will have a significant cost advantage over the existing airlines that have large overhead expenses. By focusing on a single type of aircraft, a single class of travel, and initially a single route, systems will be simple and costs will be kept to a minimum. SkyTrails will continuously focus on maintaining a low cost base in order to keep this advantage. Low Break-Even Point By operating the B757, SkyTrails will have lower operating costs and a low break-even point (40 passengers/50 percent load factor) significantly reducing the risks associated with traditional airlines. With such a low break-even point, SkyTrails will be able to make it through economic downturns with less pain than its competitors. It will also enable SkyTrails to consider medium and low density routes on a long-haul basis offering more point to point services. The Internet Maximizing the potential of the Internet will be key in keeping low distribution and administrative costs. SkyTrails will have a strong Internet presence and will use the Internet for customer interaction as well as internal functions.

Operating Strategy: One type of aircraft, one class of service SkyTrails will operate a single type of aircraft: The Boeing 757-200. By operating this aircraft type on the transatlantic route, SkyTrails will have significantly lower operating costs per trip. The trip cost for the B757-200 will be approximately £25,000 one way as opposed to £75,000 for a B747 operated by existing carriers. This demonstrates the lower risk associated with this operation. It will also enable the company to offer direct services where others offer indirect services. Moreover, it will be able to offer greater frequency than competitors operating larger aircraft. Focusing on a single aircraft type enables the company to minimize the costs of training and maintenance. SkyTrails will offer only one class of travel which facilitates processes (marketing, purchasing, training, systems, etc.). In order to provide a high quality service to its customers, SkyTrails will implement productivity and profit-based incentives for personnel. Pricing Strategy: Simple, £900 One Way SkyTrails will not need sophisticated yield management systems to determine the price of each ticket. However, SkyTrails will hire an experienced yield analyst in order to maximize revenues. SkyTrails will offer a simple fare structure which will be comprised of a maximum of four different fare types. This pricing structure will be very attractive for the small and medium enterprises (SME) who do not have access to large volume corporate discounts with the major carriers. Sales, Marketing, and Distribution Strategy 1. Corporates: SkyTrails is a business to business airline. It will focus its efforts on targeting corporate travel managers directly through a strong sales force, partnerships with credit card companies, or other entities that have access to corporate clients. SkyTrails will offer flexible pricing to suit companies' travel requirements. 2. End-users: In order to attract the traveller directly, SkyTrails' marketing strategy will focus on the lifestyle and convenience rather than price because in many cases price is not the primary issue for the business traveller. SkyTrails will only use electronic tickets which will be distributed through agents, the Internet, and our call center. SkyTrails will also distribute through travel agents as they still have a significant position in the corporate market. Growth Strategy SkyTrails will initially target the high volume routes in which it will only be a small player and not be perceived a real threat to the larger airlines. The following U.S. cities are obvious targets: New York, Boston, Washington, D.C., and Chicago. However, the medium term objective is not to increase capacity on these large routes but rather to focus on medium to low density routes where competitors flying wide-body equipment will not be able to operate profitably. London to Bradley Airport (Hartford, Connecticut) is a perfect example of such a route.

Financial Summary and Funding Requirement

Management currently estimates the total funding requirements at £25 million. This takes into account the start-up costs, the on-going operating costs, the costs of incorporating additional aircraft, and the minimum cash requirements to satisfy the CAA.

The table above outlines the value of the company in 2005. This assumes conservative cash flow multiples and we therefore believe that these valuations are on the low side of the spectrum.

By continuously focusing on the needs of the premium class business traveller, SkyTrails will provide the best value proposition in the markets it serves.

We exist to provide a valuable service to our customers, a rewarding opportunity for our employees, and profitability to our shareholders. We believe that success in this endeavor depends on our employees. Satisfied employees lead to satisfied customers, which lead to satisfied shareholders. To achieve this, we enable our employees to act with an entrepreneurial spirit, and we value those willing to take responsibility for their actions and the consequences of those actions. We treat employees as family, which fosters intimacy, informality, strong relationships, caring attitudes, and it makes work more fun. We give employees the opportunity to become shareholders and to participate in the financial benefits of ownership. People take better care of things they own. We treat employees with respect, which encourages them to treat each other and every customer with respect. We want our customers to experience legendary service that makes a lasting impression. Providing exceptional value to customers requires hard work and concentration. Hard work is most effective when processes are simple. Simplicity reduces costs and speeds processes. We do not cut corners. We believe in doing things right the first time. We take pride in our efforts as well as the rewards. Throughout this endeavor, safety will be the overriding force behind any decision.

During the start-up phase, the operations side of the business will be outsourced to TravelAir reducing management needs and ensuring a timely launch.

Our aim is to achieve a good balance between senior airline professionals and creative young managers.

Markus Friedman, Chairman (59)

After graduating from the University of Geneva in Law and Political sciences in 1964, Mr. Friedman joined CWS, a Swiss-based company producing industrial hygienic products and soon became CEO. In 1991, after 27 years at CWS, Mr. Friedman left the company and joined EBEL, the Swiss watch manufacturer, as CEO. He brought in Investcorp as a shareholder and restructured the company. In October 1999, Mr. Friedman orchestrated the sale of EBEL to LVMH, the French luxury goods group and left EBEL. Mr. Friedman is a shareholder in Avcon, a Swiss-based company that manages a fleet of private jets.

William Scott, Founder and Managing Director (27)

Mr. Scott has been actively involved in the airline industry since he joined Chase Manhattan Bank's Aerospace Group in 1995. He was involved in aircraft financing, airline privatisation and restructuring, and M&A transactions. More recently, Mr. Scott worked for Southern Winds, a regional airline in Argentina founded in 1996. He worked closely with the CEO in raising equity and on strategic issues. Mr. Scott holds a B.Sc. Economics from the London School of Economics and an M.B.A. from the Columbia Business School.

Frederick Rodmann, Finance Director (35)

Mr. Rodmann has been Assistant General Manager of Pegasus Airlines, a Turkish charter airline, since 1992. As Assistant General Manager he was actively involved in many aspects of Pegasus business and has wide aviation experience. Mr. Rodmann assisted Aer Lingus, the Irish flag carrier, to sell Pegasus Airlines to its current owners, the Cukurova Group in 1994. Under his stewardship Pegasus has made profits in each of the last six years and has grown its fleet from two to sixteen aircraft. Prior to joining Pegasus, Mr. Rodmann worked for Price Waterhouse in Dublin from 1986 to 1992. Mr. Rodmann is a member of the Institute of Chartered Accountants in Ireland. He also holds a Bachelor of Commerce degree from University College Galway, Ireland.

Joseph Orr, Corporate Sales Manager (32)

Mr. Orr has gained over 7 years of sales experience within the airline industry. The majority of this was at Virgin Atlantic where he worked within the Corporate Sales Department. His last role of National Account Manager gave him sole responsibility for a number of Virgin's largest volume clients—a portfolio that was valued at £35m. Prior to this, Mr. Orr was Area Sales Manager covering the city of London. Though the smallest geographical territory within this team, it was the highest revenue generating area and had the highest proportion of clients contracted to Virgin. Mr. Orr left Virgin Atlantic earlier in 2000 and was appointed head of Airline Supply at lastminute.com prior to joining SkyTrails. He holds a Bachelor of Arts in Business Studies with travel modules.

Oleg Schweitz, Marketing Director (31)

Mr. Schweitz brings over 10 years of marketing and branding experience to SkyTrails. Having spent 3 years in International media planning at the CIA Group, he then moved to Warner Bros as Marketing Manager, overseeing all Interactive Entertainment products published across Europe. Mr. Schweitz joined AT&T as Brand Manager in 1996 with responsibility for brand marketing and advertising strategy during its key consolidation period in the U.K. Most recently Mr. Schweitz has been the Marketing Director with Paramount Television responsible for marketing and airtime sales revenue for the Digital, Cable, and Satellite broadcaster and a marketing department of eight. Mr. Schweitz is a qualified Chartered Marketer with the Chartered Institute of Marketing.

Ken Loman, Technical Director (39)

Mr. Loman has accumulated over 20 years of experience in the industry. On leaving the Royal Air Force in 1985, Mr. Loman worked with Jersey European in the Maintenance Control Department. In 1988 he moved to work with Air Europe as a Project/Development Engineer within the Technical Services Department. In 1991, he became involved in the start-up of CityFlyer Express as Technical General Manager. The airline achieved the First JAR 145 Approval for which he was the Accountable Manager. Late 1997 Mr. Loman worked on a short-term contract involved in the re-launch of Qatar Airways until late 1998. Since this time Mr. Loman has been working on a consultancy basis for a number of aviation related entities.

John MacDonald, Director (subject to clearance from non-compete with British Airways)

Mr. MacDonald is an active entrepreneur and general manager with skills in the identification and analysis of business opportunities, and their subsequent implementation and management. John MacDonald has a proven track record in founding, developing, and selling airline companies. In 1982, he founded and was the Managing Director of Connectair Limited, a commuter airline for British Caledonian. Connectair was successfully sold to ILG, Air Europe in 1988. From 1991 to 1999, John MacDonald was the Executive Chairman of CityFlyer Express, the premier British Airways Express Franchise. CityFlyer Express was sold to British Airways in 1999.

John MacDonald is a Non-Executive Director of Cannons Group plc and Positek Limited. Mr. MacDonald holds a B.A. from Southampton University and an M.B.A. from Cranfield University.

Ryan Roland, Director

Educated primarily in the Great Britain, Professor Roland earned B.Sc. and Ph.D. degrees in Chemistry from University College, London University. He also received degrees in Business Administration from Manchester (Dip. B.A.), Harvard (M.B.A.) and Columbia Business Schools (Ph.D.).

Professor Roland served on the faculties of the UCLA Graduate School of Management and Harvard Business School before joining the Columbia Business School faculty in 1979. He has also served as a Visiting Professor at INSEAD, Fontainebleau, France, Hong Kong University of Science and Technology, and the China Europe International Business School.

He has undertaken both educational and consulting activities for major corporations in the United States and overseas. Included are: AT&T; Aetna; American Cyanamid; Bankers Trust; Bell Canada, Bell Laboratories; Bell Communications Research; BOC; Ceverceria Cuahtemoc (Mexico); Chase Manhattan Bank; Chemical Bank; CIGNA; Ciba-Geigy; Cluett Peabody; Corning; Digital Equipment; Equifax; The Equitable Life Assurance Society of the United States; Essilor of America; FMC; General Foods; General Electric; Goodyear; GTE.; Hoescht-Celanese; IBM; Johnson & Johnson; L'Air Liquide; MacDonalds; McGraw-Hill; Merck; PaineWebber; Pfizer; Singer; Sony; Stone Container; Thompson; and Unilever. Professor Roland is widely published. His articles have appeared in numerous journals and reviews. Professor Roland has also published five books.

Opportunity

In order to remain competitive, corporations have become more cost conscious and have taken steps to tighten their travel and entertainment budgets, often by requiring their employees to travel on a specific airline or in economy class. SkyTrails believes there is a fantastic opportunity to create a single class long-haul airline that will bridge the growing gap between business and economy class travel. London Stansted Airport offers attractive opportunities for long-haul travel and JFK is the most popular airport in the New York area. We believe that targeting the London-New York route makes sense because it is the busiest transatlantic route with 3.8 million passengers in 1999.

Tighter Travel and Entertainment Budgets

Travel and entertainment budgets of large and small companies represent on average 7 percent of operating costs and are the third largest category of controllable corporate expense behind salaries and data processing. These costs are coming under increasing scrutiny as companies try to maintain their profitability levels. As a result of this trend, more and more companies are implementing strict travel policies and are forcing employees to travel economy class. While this is still predominantly a phenomenon occurring for short-haul flights, some companies have already implemented these rules on long-haul flights as well. Only large companies with enough bargaining power obtain discounts from airlines for business class travel. These discounts range from 15 percent to 50 percent, depending on the size of the company travel budget. Large corporations therefore continue to allow their passengers to fly business class on long-haul travel because they benefit from these discounts. For smaller companies, the choice is more difficult: either pay full fare business class and travel in comfort or pay full fare economy class and travel in a cramped environment resulting in employee fatigue and inefficiency. Many companies do not have any other choice but to force employees to travel economy as business class is too expensive.

Bridging the Business-Economy Gap

The opportunity has been created by a widening gap in long-haul travel between economy class and business class, both in terms of price and service offered. Prompted by the introduction in the early 1990s of Virgin's Upper-Class, a business-first product, competitors have had to either improve the quality of their business class (British Airways) or follow suit by eliminating first class services and offering a business-first product (Continental Airlines). As a result of these changes, business class on long-haul flights has improved significantly but prices have also increased accordingly. Conversely economy class has seen very little improvement and overall economy class prices have decreased as a result of over capacity.

The following table gives us an overview of this trend:

There is a segment of the business travel market that cannot or will not continue to pay business class fares for long-haul travel. These business travellers are getting the worst deal since they are paying full-fare economy as they need the flexibility to change their ticket but are getting the same service as a leisure traveller paying a deeply discounted economy fare.

• SkyTrails will provide an attractive alternative: A "Business Class type" service for £1,800

LONDON-NEW YORK /STANSTED-JFK

While the overall transatlantic market is very competitive and many airlines have recently complained of over capacity in the market, fares have only been reduced in the economy class cabin where we tend to see a larger portion of deeply discounted fares. SkyTrails believes that it is the best strategy to start competing on the busiest transatlantic route where we only need a small share of the market to achieve profitability. In 1999, over 3.8 million passengers flew between London and New York (source: CAA). SkyTrails' initial share of the market will be approximately 2 percent. It will be difficult for established airlines to react in such a dense market. With higher fixed costs and larger market shares, established players will be reluctant to do so. The cost of competing on price would by far outweigh the cost of accepting a small erosion in their market share.

STANSTED AIRPORT

Stansted is London's third international gateway and one of the fastest growing airports in Europe. Growing at over 30 percent per annum, it served 9.9 million passengers in 1999. Stansted has a catchment area of 11.5 million people representing 20 percent of the U.K. population. Stansted is operated by the British Airport Authority (BAA), a publicly traded company. The BAA has a keen interest to see Stansted grow and has invested over $750 million since 1986.

Existing Unserved Market for Transatlantic Services

Currently, no airline is offering a service to New York from Stansted Airport which means that SkyTrails will have no direct competition within the Stansted catchment area. In 1999, 2.65 million passengers in Stansted's catchment area travelled to the USA (source: CAA). These passengers will naturally prefer flights from Stansted. The low cost airlines operating out of Stansted—Ryanair, Go Fly, and Buzz—are all recording an increase in business travellers. These cost conscious business travellers are natural customers for SkyTrails.

Stansted's Catchment Area

Excluding Central London, total population of Stansted's catchment area is 11.5 million. The catchment area includes Essex, Suffolk, Norfolk, Cambridgeshire, Northamptonshire, Leicestershire, Lincolnshire, Bedfordshire, and Hertfordshire.

The most interesting region of Stansted's catchment area is Cambridge. Over the past three years, Cambridge has transformed itself into the home of fast-growing high technology companies. Over 1,200 companies employing over 35,000 people are based in the Cambridge area. Also, 12 major global corporations have established research centres in the area including Microsoft, Nokia, and Xerox.

Easy Access

The Stansted Express rail link runs every 15 minutes to/from Liverpool Street Station (heart of the city of London) right into the terminal building at Stansted airport. Travelling time is 41 minutes. Passengers working in London will be able to leave their offices 70 minutes before takeoff time, a convenience no other airline can offer.

Stansted is located just 30 miles from the North East of London and only 15 miles away from London's orbital motorway (M25). Stansted is adjacent to Junction 8 on the M11 which makes access easy for people working in Canary Wharf.

London Stansted Airport also offers easy onward travel facilities to Cambridge, Ipswich, and Norwich either by road, train, bus, or coach.

Market Acceptance

More and more business travellers use Stansted as an alternative to Heathrow and Gatwick, both of which have become very hectic. In 1998, 32 percent of passengers travelling through Stansted were business travellers. A survey conducted by the Financial Times in November 1999 on 800 business travellers working in the city of London revealed that business travellers rated Stansted higher than both Heathrow and Gatwick.

Friendly Regulatory Environment

Slots are available at Stansted and new airlines have the priority when applying for these. Slots are distributed for each season and airlines need to apply approximately three months in advance (June deadline for winter schedule). SkyTrails has already secured slots at Stansted for its desired schedule.

Airlines flying out of Stansted are not governed by the Bermuda II Bilateral Agreement between the U.K. and USA. Stansted falls under the regional airports category which enjoy open skies with the USA. This means that airlines will automatically be granted traffic rights for flights from Stansted to the USA.

For further information on the regulatory environment please see the Appendix.

Lower Costs

Charges at Stansted are at least 20 percent below those of Heathrow and Gatwick. In addition, SkyTrails has negotiated attractive deals with suppliers who are eager to see transatlantic services from Stansted.

JFK AIRPORT

JFK is the largest and best known airport in the New York area. The new start-up JetBlue is based at JFK and will potentially be beneficial for SkyTrails in terms of connecting traffic.

Regulatory Environment

JFK has a slot restriction from 2 P.M. to 8 P.M. but under the new entrant rule, SkyTrails has been able to obtain the slots required for the initial two daily flights.

Service/Product

SkyTrails will introduce a single class concept to long-haul air travel. The newly designed class will provide a "high tech," spacious, and comfortable environment. In many ways, SkyTrails aims to create a "boutique" airline which replicates the concept of boutique hotels and targets the same type of customers.

In order to achieve this goal, SkyTrails will hire and partner with well known designers and suppliers for various aspects of the business. The seats and aircraft cabin will be designed by Ric Sloan, one of the most fashionable industrial designers of the moment. He was featured in Forbes magazine (12 May 2001) as "one designer to watch." SkyTrails will partner with a fashion designer for the uniforms and with well known restaurants for the catering.

SkyTrails' primary target will be young executives (25-45) that are lifestyle driven.

In addition to a standard airline four abreast seating configuration, SkyTrails will also offer a unique meeting room environment enabling passengers to conduct business in an office setting while travelling.

Seats will have a 52-inch pitch and will recline at least 150 degrees, very similar to the current business class of traditional carriers. SkyTrails will make a special effort to offer good lighting for passengers, something which is lacking in today's airlines. Given the number of proposed seats, each passenger will enjoy considerable improvement in air quality over the established operators, an issue that is attracting increasing attention in the media.

SkyTrails will ensure that the aircraft is equipped with the amenities business travellers need in order to continue working while travelling. Again, SkyTrails will aim to provide these services at a fair price in order to stimulate their use rather than high prices which are prohibitive. SkyTrails aims to create a business centre in the aircraft where passengers will be able to use telephone, fax, and printer. Each seat will be equipped with a laptop power supply. SkyTrails will also provide e-mail access and use of a personal mobile phone for each passenger.

Convenience

SkyTrails will focus on offering a high quality service from the time of booking right to the time at which the passenger arrives at hotel/home in the destination city. Passengers will have the choice of booking a seat through the Internet, a call centre, or a travel agency.

e-tickets: Tickets will be 100 percent electronic and the passenger will only need their passport and confirmation number in order to access the aircraft. They will be able to print a copy of their itinerary from the website or will get confirmation numbers from the call centre. Free transfers to/from airports: A free shared limousine service will be offered between JFK and Manhattan on arrival and departure. On the Stansted side, free rail ticket to/from Liverpool Street station will be offered or a free car service to/from Cambridge. Valet Parking Service: SkyTrails will offer a complimentary valet parking service at Stansted which will save time for passengers wishing to drive to the airport. Larger carry-on luggage: The increased space on board will also accommodate larger carry-on luggage which is a sensitive issue for business travellers who do not wish to check in their luggage. No more check-in: Allowing larger carry-on luggage enables us to abolish the concept of check-in and simply close the gate 15 minutes prior to takeoff. For those passengers with lots of luggage, SkyTrails will offer a door-to-door service for an extra fee. By abolishing check-in, SkyTrails will not only avoid many delays but it will also save money that other airlines spend on lost and damaged luggage. Reduced overall transfer time: Passengers working in the city of London and Canary Wharf will save at least 1 hour from the moment they leave their office to the time of takeoff. On arriving in New York, they will save at least 30 minutes as they will not have to wait for their luggage and for a taxi. Boarding and disembarking the aircraft will be much faster due to the smaller number of passengers on each flight. Passengers travelling in the opposite direction can expect similar advantages over the competition. Personalized service: SkyTrails will have individual DVD players for passengers to view the movie of their choice. On the catering side, SkyTrails intends to offer a choice of cuisine by partnering with well known brands. On the night flight from New York, passengers will have the option to order their breakfast on the train into Liverpool Street station, therefore giving them more time to sleep on the aircraft. SkyTrails will accommodate passengers in departure and arrival lounge. The arrival lounge in Stansted will have shower facilities to accommodate business travellers going straight to work. Finally, SkyTrails will offer enhanced shopping on-board through extensive product offerings. SkyTrails will sell exclusive products not widely available in traditional stores.

SkyTrails will take special care in hiring and training the cabin crew as the level of on-board service is highly dependent on the quality of these people.

Frequent Flyer Program

Major airlines have been successful at retaining customers by giving them frequent flyer miles each time they travel. As customers get more miles, they gain privileges which include access to airport lounges, upgrades, free flights, and other benefits. In addition, major airlines, through global partnerships are able to offer these programs on many different airlines.

SkyTrails will introduce a frequent flyer program of its own which will be very simple and easy to understand. Most airlines have very complicated programs which often make it difficult for customers to redeem their miles. SkyTrails will offer frequent flyer Internet cash/points that customers will be able to spend on specific websites. SkyTrails will partner with selected ecommerce sites in order to provide this service. SkyTrails believes that its value proposition combined with good service and a simple and innovative frequent flyer program will be sufficient to retain customers.

Operating Strategy

SkyTrails' primary objective is to establish itself as a niche player in the long-haul market of business travel by providing a high level of service and comfort at an attractive price. The use of a simplified organizational structure, a common aircraft type, and a policy of system wide commonality will significantly reduce operating costs over the more traditional airlines. This, coupled with our focus on premium long-haul passengers, will enable us to achieve much higher margins than our competitors.

Focus on a single type of aircraft and a single class of travel

SkyTrails opted for the B757-200 based upon its capacity, range, operating costs, reliability, and availability. By operating a narrow body aircraft on long-haul flights, SkyTrails is able to reduce significantly the operating costs and offer more frequencies. By operating a single aircraft type, SkyTrails will minimize costs associated with training and maintenance programs. Pilot commonality, aircraft interchangeability, technician interchangeability, great economies of scale in spares holdings are some of the benefits associated with single aircraft type operation. Also by offering a single class of service, SkyTrails reduces significantly the complexity of serving three different classes (i.e., catering, marketing, purchasing, systems, etc.).

Ensure service-oriented personnel through productivity and profit-based incentives

SkyTrails wishes to maintain labour cost flexibility by providing a portion of total compensation in the form of profit sharing. Maintaining high productivity of the work force is also an important aspect that management will focus on. SkyTrails believes that employee ownership is fundamental to its success and will provide schemes to promote this.

Focus on long-haul, point-to-point, nonstop services

SkyTrails will initially focus on the London-New York route where it can operate profitably with a small share of the market. SkyTrails will maintain this focus in the future by choosing routes where a large market already exists. Following New York, SkyTrails will start services to Boston, Chicago, and Washington, D.C.

Outsource non-passenger related activities

SkyTrails will outsource many services to quality companies in areas where there is no direct contact with the passengers. SkyTrails aims to offer a quality service to its passengers and will therefore ensure that only its staff interact directly with the customers.

Pricing Strategy

Simple and transparent fare structure.

SkyTrails will use a simple yield management system to determine the best price for each single seat in the aircraft. SkyTrails will have a simple fare structure with three different fares. SkyTrails will monitor the purchasing patterns and will be able to restrict the amount of discounted fares on certain flights.

In order to attract large corporations, SkyTrails will offer one way fully flexible tickets between £1,400 and £1,700 depending on the volumes involved. While large corporations already get deals at around £1,000 one way, small and medium enterprises (SME) have no means to achieve any significant discount from the full fare business class (£3,580 rtn) SkyTrails will offer very attractive alternatives for the SME market.

SkyTrails will use special promotions in the first months of operations in order to attract as many customers as possible and get them to experience the service. The initial objective is to focus on load factors rather than yields in order to penetrate the market and stimulate product trial.

Marketing and Sales Strategy

In order to be successful in the market of business travel, SkyTrails needs to convince two decision makers: 1.) the travel manager or person who makes the travel policy for a company and 2.) the traveller himself. The travel manager and the traveller make decisions based on different criteria and it is important to satisfy both decision makers in order to ensure success.

The travel manager is mainly driven by price and his objective is to negotiate the best deal for his company. On the other hand, the traveller is driven by frequent flyer programs, comfort, convenience, and lifestyle. SkyTrails will have a sales team that will focus on travel managers of large and small companies and will have a conceptual and lifestyle driven communication strategy that will appeal to the traveller.

Sales and Distribution

Large volume companies (1000+ sectors per annum).

SkyTrails will target the large financial institutions and other companies with a major presence in both London and New York. In the city of London and in Canary Wharf there is great concentration of London-New York premium class traffic. The Top 20 London-New York spending companies account for close to 100,000 premium sectors per annum (sectors: one-way ticket). These companies are able to negotiate discounts of up to 50 percent off published fares and are often tied in to global deals with the major airlines. While SkyTrails can still offer more attractive deals to these large corporates, it does not anticipate obtaining primary carrier status. SkyTrails will most certainly get secondary or tertiary status therefore capturing up to 20 percent of these companies' volumes. It will sign commercial agreements with these companies.

Medium Volume Companies (50-1000 sectors)

SkyTrails has already identified over 200 companies in this category. These companies are the most attractive for SkyTrails because they have a weaker purchasing power than the large volume companies and therefore do not get discounts in excess of 30 percent off published fares.

Small and Medium Enterprises (up to 50 sectors)

SkyTrails will also target the small and medium enterprises (SMEs) market. The Stansted catchment area of London, North London, Essex, Cambridgeshire, Hertfordshire, Essex, East Anglia, and the Southern Midlands has a proliferation of SMEs, many of which are subsidiaries of U.S. based companies. SkyTrails will offer a compelling value proposition to these SMEs based on corporate discounts from an already competitive pricing structure. British Airways and other major transatlantic airlines do not offer corporate discounts in the SME market.

SkyTrails will hire a strong sales team that will target companies directly. SkyTrails will also team up with a major credit card company and large business travel agencies that will give SkyTrails access to a large number of SMEs. SkyTrails believes that getting companies enrolled will be a critical success factor and will ensure that its value proposition is well communicated to the businesses likely to use the service.

Electronic Ticketing

SkyTrails will offer customers quicker, easier, more convenient ways to arrange travel through the use of e-ticketing or "ticketless travel." An e-ticket entitles a passenger to all the same conditions of a conventional paper ticket, however instead of being printed, the e-ticket is stored in the SkyTrails e-ticket database. The customer simply receives a paper itinerary/receipt for Customs and Immigration.

Distribution and Revenue Management

SkyTrails will use an integrated ticketless software (Open Skies by HP) which offers an online booking engine as an alternative to traditional airline distribution through Computer Reservation System (CRS). Open Skies also offers streamlined revenue accounting, airport functionality, and a customer database function. The Open Skies system is currently used by Go, Easyjet, JetBlue, Buzz, CityBird, and many others.

Travel Agency

SkyTrails will form relationships with the key U.K. business travel agents giving them an opportunity to increase their commission by taking some of the risk. Travel agents will be able to buy in bulk in advance and get higher commissions than if they simply book tickets on an ad hoc basis.

Travel agents' commissions in the U.K. have declined from 9 percent to 7 percent in recent years and are set to reduce further in 2001. SkyTrails will offer attractive returns for agency partners—well above U.K. industry standards.

Call Centres

SkyTrails will operate an efficient, customer oriented call centre open 24 hours a day in order to serve individuals, corporate clients, or travel agents. Fully trained staff will also be able to handle website enquiries.

Direct Sales through the Internet

Harnessing the power of the Internet will be key to the success of SkyTrails. It is the most cost effective distribution method and SkyTrails will heavily promote its website to attract direct passengers. A user friendly website will be set up to sell tickets, select seats, choose meals, check punctuality, etc. In addition, the website will enable passengers to choose connecting flights with European low cost airlines (Ryanair, Go Fly, Virgin Express, Easyjet, Buzz) and also with U.S. low cost airlines. This will enable SkyTrails to expand its target market by capturing connecting passengers as well as point-to-point passengers.

An extranet corporate booking tool will be developed for use by corporate clients.

SkyTrails will form strategic partnerships with leading travel, luxury goods, and financial websites targeting similar audiences with hyperlinks between websites.

Advertising and Communication

SkyTrails'customer base is well defined which will enable SkyTrails to focus its advertising efforts to specific locations and specific newspapers and magazines.

Growth Strategy

Phase i: market penetration in high density routes.

SkyTrails will initially target the most dense transatlantic market starting with New York. We will then expand to Boston, Washington, D.C., Dulles, and Chicago.

By targeting very dense markets, SkyTrails will only need a small portion of the overall market in order to be profitable.

Phase II: Extend service to medium/low density long haul routes

We see much larger potential in medium to low density long haul routes where the traditional airlines are not present today. These destinations include Stewart Airport or Whiteplains Airport which are located in New York state but within easy reach of Greenwich and Stamford (Connecticut) which are key business centres. Passengers will be able to bypass the large hubs for long haul flights in the same way the regional jet is able to bypass hubs on short haul flights.

Other Opportunities

While scheduled long haul flights will clearly be our focus, SkyTrails will take advantage of opportunities in the high-end segment of the leisure market where we are seeing strong growth. Such opportunities could fit in nicely with the business travel which tends to be low at weekends and during the summer season.

SkyTrails will also consider ad hoc charters and corporate charters on a case by case basis.

Air Operator's Certificate and Operating License

In order to conduct commercial flights, SkyTrails will need an Air Operator's Certificate (AOC) and an Operating Licence which are granted by the U.K. Civil Aviation Authority. In order to get an AOC and an Operating Licence, the company has to comply with safety, financial, and other requirements laid down by the CAA/JAA. The application process can take over 12 months to complete. In order to avoid relying on this process to start operations, SkyTrails will use the AOC and operating license of TravelAir in the first year of operations. By using an existing airline, SkyTrails significantly reduces the risk of delays in the start-up phase. SkyTrails will in effect outsource the operations to this existing airline for the first 12 months which will enable SkyTrails to focus on the commercial aspects of the business. From the passenger's perspective, TravelAir will be invisible. The crew will have SkyTrails uniforms and the aircraft will have SkyTrails livery. TravelAir has tremendous experience with B757 ETOPS (Extended Twin Operations) operations and is viewed by many as the best quality charter airline in the U.K.

Through TravelAir, SkyTrails has obtained landing and takeoff slots at both Stansted and JFK for the following times:

TravelAir will transfer all the slots obtained to SkyTrails once it obtains its own AOC.

In order to maintain a high level of customer service, SkyTrails will either employ its own staff or ensure the ground handling agent has dedicated staff for all aspects of airport handling involving contact with customers. For other aspects of ground handling, SkyTrails will initially outsource its needs until critical mass has been established. SkyTrails will lease space in each airport for lounges and offices.

Maintenance and Training

Heavy maintenance and training will be outsourced, initially to TravelAir.

The Boeing 757-200 is one of the most popular commercial aircraft ever built. Over 800 B757s are currently in service. Boeing is starting to deliver a stretched version, the B757-300 and is presently evaluating the possibility of building an extra long range B757. The B757-200 is usually configured to accommodate 180 passengers in a two-class configuration. The B757-200 has a high level of dispatch reliability (in excess of 99 percent).

The other possibilities for SkyTrails could have been the B767 which is a wide body aircraft. SkyTrails believes that the risk involved with operating a B767 are 30 percent higher and also limit the ability to expand in smaller markets. SkyTrails could have considered the BBJ which is equivalent to a B737 long range. Unfortunately, the BBJ is still in its early days and the lack of availability in the market is what has driven our decision towards the B757. The BBJ could be ideally suited for smaller markets.

Bilateral Agreement between U.S. and U.K.

Flights from major international airports in the U.K. to the U.S. are regulated by a Bilateral Agreement between the two countries. The government negotiates routes for its country and then distributes these to the airline of its choice. Usually airlines have to submit an application detailing why its proposed service is in the best national interest. This creates a barrier to entry which is difficult to overcome. In addition, landing and takeoff slots at London Heathrow and London Gatwick are difficult to obtain creating another barrier to entry. These barriers to entry give a strong advantage to existing airlines. However, U.S. and U.K. government have been negotiating possible liberalization of skies. If this happens, we expect to see additional capacity out of Heathrow to the USA which may have an impact on yields.

Open Skies for Regional Airports (Bermuda II Agreement)

International flights from all the regional airports in the U.K. (Stansted, Birmingham, Manchester, etc.) are regulated by this Agreement with the U.S. which enables all national airlines of each country to operate an unlimited number of flights between these airports and any U.S. international airport. SkyTrails will therefore be able to benefit from this Agreement by operating out of Stansted. SkyTrails will still have to apply for the routes but these will be automatically granted. The application was filed on 12 September 2000.

A more detailed overview of the regulatory environment written by Eugene Stokes, Aviation Partner at Smyth Adair Benson, is provided in the Appendix.

Global Airline Industry

Major airlines characteristics:.

Focus on hubs In order to increase load factors, major airlines have adopted a hub and spoke strategy which consists of centralising flights at an airport therefore benefiting from connecting passengers in addition to origination and destination passengers. As a result of this strategy, many passengers are forced to make stopovers, increasing their travelling time. SkyTrails will offer point to point services which offer significant time savings for premium passengers. High fixed costs Major airlines have large overhead costs and many are tied in to labour contracts which prevent them from reducing these costs significantly. SkyTrails will maintain a lower cost base and therefore maintain a competitive advantage. Lack of customer focus Overall, airlines tend to lack customer focus. By focusing on hubs and alliances, airlines gain efficiencies but these strategies are of limited benefit to the customers. SkyTrails will offer an individual service and its success will be built on customer focus. Consolidation with major alliances: Star Alliance, One World While most industries have consolidated in the past few years through mergers and acquisitions, the airline industry's consolidation is based predominantly on alliances and minority equity stakes. Starting with code-share agreements and extending these to full alliances have been the common pattern followed by airlines around the world. These alliances enable airlines to benefit from each others network and distribution capability. While very beneficial to the airlines, it is arguable whether the consumer really benefits from these alliances as they tend to reduce competition. Customer satisfaction usually suffers as a result of this consolidation, creating an opportunity for SkyTrails. The most successful alliance to date is the Star Alliance which is comprised of Lufthansa, United, SAS, Thai, Varig, Air New Zealand, Ansett Australia, All Nippon Airways, and recently Singapore Airlines. Its main competitor, One World, is comprised of British Airways, American Airlines, Cathay Pacific Airways, Qantas, Finnair, and Iberia. Another important combination is Virgin-Singapore Airlines. Singapore now owns 49 percent of Virgin Atlantic and the two airlines will be a strong competitor on the transatlantic market. Following Swissair's acquisition of 85 percent of Sabena, other European airlines have started to talk about possible mergers and acquisition. On the U.S. side, United and U.S. Airways have announced a merger which has prompted other talks within the major airlines. This consolidation will be closely monitored by the regulatory bodies and it is uncertain how many will be approved. SkyTrails will not take part in any alliance and will remain committed to its niche strategy. The larger the alliances become, the more opportunities there are for niche airlines to prosper. Low Cost Airlines are gaining market share Following the continued success of Southwest Airlines, many start-up airlines have emerged in the past ten years, both in Europe and in the U.S. The low cost airlines focus on short-haul traffic and have been key in stimulating demand by offering extremely low fares. These airlines initially targeted the leisure traveller but in recent years they have attracted a growing amount of business travellers who were not satisfied with the high prices charged by the major airlines. The main challenge faced by these young companies is that of safety. After the ValueJet accident in Florida, customers were concerned that low cost airlines did not maintain their aircraft correctly and were more dangerous to fly than the majors. While low cost airlines continue to thrive in the U.S., the more recent European additions such as Easyjet, Virgin Express, Go Fly, Ryanair, and others are experiencing tremendous growth and are presenting a serious challenge to the major airlines short-haul strategies. SkyTrails will benefit from this trend as passengers are now used to flying with newer airlines which do not have the history of State-Owned carriers. Regional Airlines are increasing point-to-point travel The Regional Airlines are by far the most profitable segment of the market with net margins as high as 15 percent. They benefit from very fuel efficient modern aircraft (Regional Jets) and are able to focus on high yield passengers by providing point-to-point services and more frequencies. By using smaller jets, boarding and disembarking times are reduced which enables fast turnaround of the aircraft. Companies such as Comair and Atlantic Coast in the U.S. and Crossair, Air Littoral, and British Regional Airlines in Europe have grown tremendously in the past five years. SkyTrails is in effect an extension of the Regional Airlines by offering point to point services on a long-haul basis.

Breakdown of Passengers on London to New York route April 1999-March 2000

Top 10 U.S. Destinations from Heathrow October 1998-September 1999

Stansted Catchment Area Originating Traffic to New York

SkyTrails Share of New York market from inner and outer catchment area

Inner and Outer Catchment

Focus on Point to Point Traffic

The majority of the business traffic between London and New York is point to point as business travellers from other European capitals tend to fly direct.

Connecting Traffic

While SkyTrails will focus primarily on point to point, it will benefit from connecting traffic originating in secondary cities in the U.K., Europe, and the U.S. Premium travellers in those cities have to connect in a hub in order to travel to the U.S. and they could easily combine a low-cost European flight into Stansted with a SkyTrails flight to the U.S. The following table highlights the various secondary cities that are served by a low-cost airline operating at Stansted and with arrival and departure times within 2 hours of a SkyTrails flight:

Premium Capacity on the London-New York Route (Sept.-Dec. 2000)

Market Shares on Planned Routes for SkyTrails:

Product on the London-New York Route

British Airways (BA)

BA is the market leader with over 40 percent of premium capacity. BA has run into a number of difficulties in the past year and reported disappointing results in 1999. The airline has clearly stated its strategy to focus on the business and premium traveller. BA has introduced a full-sleeper Business Class. We believe that BA is right to focus on the business segment but by offering a full-sleeper Business Class, they are taking the risk that First Class passengers downgrade to Business Class. In addition, by providing this higher quality product, BA is betting that it will be able to continue increasing the price of its business class product. It is simply widening the gap between business class and economy. BA recently introduced World Traveller Plus, which corresponds to Virgin's Premium Economy. The pricing will be similar to SkyTrails but the product is simply an economy class with more legroom. Although BA does offer a good product, it has been harmed by bad press, disappointing results, and unmotivated staff. BA's global strategy with American Airlines has been delayed by the regulatory bodies but BA is still trying to make it work under a weaker form. While BA and AA combined will be a powerful team, the culture and product do not seem to be aligned today.

American Airlines (AA)

AA has 7 daily frequencies with B767 and A300 offering 18.1 percent of the market capacity. AA's service and product standards are below that of the competition. As mentioned earlier, AA's alliance with BA, if it goes through, will be a powerful combination in terms of size and resources.

Virgin Atlantic Airways (Virgin)

Virgin's share of the premium segment is 12.3 percent. Virgin is by far the most innovative player in today's market. Virgin was the first airline to introduce a business-first service in the early 1990s and is the only airline to offer a premium economy section on long-haul flights. Virgin has a code-share agreement with Continental which enables both airlines to sell tickets on each others' flights. The recent sale of 49 percent of Virgin to Singapore Airlines will also provide Virgin with an increase in connecting passengers from Asia. Virgin is also rumoured to be considering a first-class only concept operating BBJs, ACJs, or Bombardier's Global Connector. This does not represent a threat to SkyTrails as Virgin is targeting the First Class passenger.

United Airlines (United)

United has the same share of the premium market as Virgin with 12.3 percent. United is one of the leading airlines in the Star Alliance which provides much connecting traffic. United's product is industry standard and is viewed as a follower rather than a market leader.

Continental Airlines (CO)

CO is more of a niche player in this market with only two flights a day. It operates out of Gatwick to Newark. However, its code-share with Virgin gives it access to Heathrow and JFK. Continental is a strong player at Newark where it controls over 50 percent of the landing and takeoff slots. It is planning to increase its presence at Newark by building a new terminal for additional wide body aircraft. In May 2001, Continental started a service from Stansted to Newark with a B757. This certainly helps to raise the profile of Stansted as a gateway to the U.S. Continental's B757 only has 16 business class seats and its early morning departure from Stansted does not suit the London or Canary Wharf based traveller.

British Midland (BM)

BM has been attempting to obtain traffic rights from Heathrow to the USA, so far unsuccessfully. It is determined to keep trying to get into the market. BM has ordered Airbus A330s which will be delivered in summer 2001 and which it intends to use on routes to the USA. British Midland has obtained rights to fly from Manchester to the USA but not from Heathrow.

Funding Needs

SkyTrails' total funding needs amount to £25 million. The following table summarises the uses of funds to August 2003 which is the point when accumulated net uses of funds reaches its highest point:

SkyTrails has to set aside a Bond which is required by the CAA in order to protect consumers during the period that SkyTrails is operating under TravelAir's AOC. SkyTrails also needs to have sufficient funds to satisfy the CAA that it can survive with no revenues for 3 months at the time it applies for its own AOC.

In order to value airline companies on the same basis, we use the Enterprise Value (EV) to EBITDAR multiple. EBITDAR is cash flow before rentals (operating leases) which, for SkyTrails amounts to £72.6 million at the end of the fourth fiscal year. The following table shows the multiples for European publicly traded airlines:

EBITDAR: Airlines are valued based on EBITDAR multiples (as opposed to EBITDA) because airlines have different mixes of operating leases and on-balance sheet financing for aircraft which therefore would distort valuations based on EBITDA multiples.

If we take a very high discount rate of 50 percent to account for the risk involved and assume that we are four years away from the end of the fourth fiscal year, we get the following present values:

Operating Margins

The financial model produces an operating margin at the end of year 4 of 21.3 percent. Margins well in excess of this are currently being attained by regional carriers, even though the more traditional airlines do not reach these heights. We believe this margin is on the low side because we have made conservative assumptions. We will attain margins similar to the better regional carriers as our strategy is similar to theirs. The table below shows the operating margins obtained by a selection of regional and non-regional airlines and was sourced from Airline Business magazine.

Assumptions

SkyTrails will start operations with two B757-200 with an 80-seat configuration. The following table shows aircraft addition through the period of the plan:

Load Factors

We have assumed that the first two flights reach their break-even load factor after 12 months.

Other Revenue: £1,000 per sector is assumed for Cargo and Duty Free revenue.

The following table breaks down the mix of fares assumed in each year:

N.B. These figures are based on current prices obtained from suppliers

Fixed Costs

Direct costs, flight-deck crew.

11 flight crews are assumed for the first two aircraft. Each flight crew is composed of a captain and a first officer. Captain cost is assumed at £6,850 per month and first officer at £4,760. These figures include social charges, accommodation, and transport.

11 cabin crews are assumed for the first two aircraft. Each cabin crew comprises 1 purser, 2 senior cabin crew, and 3 junior cabin crew at a cost of £2,367, £1,878, and £1,670 respectively.

$25,000 per month per aircraft.

• $315,000 per month per aircraft for the first two aircraft which is based on current market conditions.
• $335,000 per month per aircraft for the next two aircraft as we assume used aircraft will be leased.
• $420,000 per month per aircraft for aircraft 5-9 as we assume new aircraft will be leased.

Security Deposits

The standard 3-month rental is assumed.

Reconfiguration Costs

We assumed £2,000,000 per aircraft for the first two aircraft of which 25 percent is paid 6 months prior to delivery and 75 percent is paid thirty days net. All other reconfiguration costs are assumed thirty days net.

TravelAir Management Fee

$42,000 per month for the first two aircraft and $15,000 per month for additional aircraft. This is consistent with the contract signed with TravelAir. We assume SkyTrails will get its own AOC in the thirteenth month of operation at which point SkyTrails will no longer pay a fee to TravelAir but incurs higher payroll cost as it takes all the operations in-house.

These include salaries and benefits for the Ground Operations/Customer Service, Sales, Marketing, Finance and Administration, and Technical departments. These are projected according to a manpower plan.

Exchange Rate: £1=$1.45

SkyTrails will using hedging techniques for both fuel and currency in order to minimize its exposure.

Interest Income: Interest rate is assumed at 3.5 percent per annum.

Annual Income Statement (£)

Regulatory Environment and Licensing Issues

Eugene Stokes Partner Head of Aviation Regulatory and Commercial Smyth Adair Benson

For the past 15 years Eugene Stokes has been a recognised specialist with an international reputation in regulatory, commercial, EC, and competition law affecting air transport and the travel industry: he advises airlines, airports, banks, governments, and regulatory authorities on a wide range of regulatory, legal, and aeropolitical issues, has been involved in all aspects of the liberalisation of aviation in the European Community and advises on both contentious and noncontentious commercial and competition issues in the aviation sector.

During this period, his airline clients have been numerous but have included United Airlines, Delta Airlines, ANA, Cathay Pacific, Philippine Airlines, Swissair, CityFlyer Express, British Caledonian, Dan-Air, and Avianca, and he has advised the new low cost U.K. scheduled carrier EasyJet since its start-up.

SkyTrails—Licensing Requirements

SkyTrails is an English registered company and its principal place of business will be in England. Under European Community Law, every air transport undertaking with its registered office and principal place of business in a Member State of the European Union must hold an operating licence granted by that Member State in accordance with the EC Licensing Regulation (Council Regulation EEC No: 2407/92). In the United Kingdom the grant of operating licences is delegated to the Civil Aviation Authority. While the EC Market Access Regulation (Council Regulation EEC No: 2408/92) provides that all holders of EC operating licences have the right (virtually unrestricted) to operate any services between any two points in the European Community ("community carriers") it leaves the rights of Community carriers to operate to points outside the FU unaffected. Community carriers require to be separately licensed by their states to perform such services according to the requirements of bilateral air services agreements between the Member States which licences them and the relevant states outside the European Union.

The bilateral air service agreement between the U.K. and the U.S. is quite restrictive, but the proposed route London Stansted/New York JFK is available under it. An application will need to be made to the CAA for a route licence following the grant of which the U.K. government (the Department of the Environment Transport and the Regions or "DETR") will be asked to designate the applicant (i.e. by diplomatic note inform the U.S. government [Department of Transportation or "DOT"] that the applicant has been designated for service under the bilateral by the U.K. government).

The requirements of an EC operating licence are quite onerous and include the issue by the CAA of an Air Operators Certificate (AOC) and demonstration to the CAA's satisfaction of stringent financial fitness requirements (which require it to be demonstrated that the applicant can discharge its financial obligations in its business for the first two years and this without any revenue for the first three months). For a new airline, these requirements (particularly the AOC requirements which relate to safety and technical competence) can take many months to process. Because SkyTrails wishes to commence service early in 2001 it has decided to contract with an existing U.K. operating licence holder to operate the services on its behalf until such time as its own operating licence is granted.

While it is permitted to enter into such an operating agreement, it is a requirement of U.K. law that an undertaking which makes seats available on an aircraft (or holds itself out as being able to make seats on an aircraft available) while not the operator of the aircraft, must (except in certain circumstances which will not apply to SkyTrails) be licensed. The applicable licence is an Air Travel Organiser's Licence (ATOL) the primary purpose of which is to protect the consumer who has advanced moneys to a seat provider in advance of receiving evidence of his contract with the actual operator.

Because of the hybrid nature of the operation, the CAA can apply the financial fitness standards of the EC licensing regulation to SkyTrails even during the period when it holds an ATOL (the financial fitness standards for which are somewhat different).

This "hybrid" arrangement whereby a new airline operation commences through the combination of an ATOL (held by the new airline pending grant of its own operating licence) and an operating agreement between the new airline and an existing U.K. operator is somewhat frowned upon by the European Commission (although it is not technically contrary to relevant EC legislation). While a number of U.K. airlines have commenced service in this way, the U.K. CAA now looks for a commitment to work towards the grant of an operating licence as soon as possible.

The Process

Route licence.

SkyTrails has selected TravelAir as the operator of the initial services. TravelAir will be required to apply for the route licence for the Stansted/JFK route and seek designation by the U.K. government. Once application has been made to the CAA it will be published in the CAA's Official Record after which there will be a 21-day period for objections to be lodged. Only other U.K. operators have the right to object but, given the CAA's pro-competitive licensing policy and the availability of this route under the U.K./U.S. bilateral, it is not anticipated that any such objector would have reasonable grounds. The possibility of an objection cannot, however, be entirely dismissed. An objection does delay the process which to some competitors might be regarded as a reason for objecting in itself even though the objection might need to be withdrawn later when grounds for the objection would need to be filed. Generally, we would not expect any other U.K. carrier to behave in such a manner.

Assuming there is no objection, TravelAir will be able to proceed after a 21-day period to grant of the licence by the CAA (who will wish to ensure that TravelAir is financially fit to operate the route—this depending to a large extent on the financial arrangements between SkyTrails and TravelAir). Following grant of the route licence to TravelAir, the process of designation by the U.K. government can be completed in a matter of days and it is not anticipated that the process of grant of an operating permit by the U.S. DOT would occupy any substantial passage of time.

If there is an objection to the application to the CAA, the CAA will fix a date for a hearing and require written submissions from the applicant and the objectors. The entire hearing process can take between three and six months and there are provisions for appeal to the Secretary of State which is a written process. It is, however, considered extremely unlikely that even if there were objections they would proceed to a hearing because there are no obvious good grounds for an objection to be made out.

On the grant of its own operating licence, SkyTrails would apply for its own route licence, having agreed with TravelAir that TravelAir would apply for its own route licence to be revoked at the appropriate point.

SkyTrails will apply for an ATOL in time to be ready to sell with the appropriate lead time. On grant to it of its operating licence the ATOL will be revoked.

Other Considerations

The U.K./U.S. bilateral requires fare to be filed and approved by the governments. SkyTrails' fares will be substantially below those of their competitors at the outset. While this will obviously be of concern to those competitors, it is not expected that they will succeed in persuading their governments to disallow them. Nevertheless they may try to squeeze a new carrier like SkyTrails out of the market by lowering their own fares. Whether such price pressure is lawful will depend on the application of general principles of anti-trust/competition law, but these principles are well known to the competitors concerned who will be well aware of the consequences of proceeding unlawfully.

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• Sustainable Aviation Fuel (SAF)

20 May 2024

Saudia group orders 105 a320neo family aircraft to support saudi arabia’s aviation goals.

Riyadh, Saudi Arabia, 20 May 2024 - Saudia Group, represented by Saudia, the national flag carrier of the Kingdom of Saudi Arabia, and flyadeal, the group’s low-cost carrier, has signed a firm order for an additional 105 A320neo Family aircraft. The order comprises 12 A320neo and 93 A321neo aircraft. This increases Saudia Group’s Airbus aircraft order backlog to 144 A320neo family aircraft.

The agreement was announced at the Future Aviation Forum in Riyadh in the presence of H.E. Saleh bin Nasser AIJasser, Minister of Transport and Logistic Services of the Kingdom of Saudi Arabia, H.E. Engr. Ibrahim Al-Omar, Director General of Saudia Group and Benoît de Saint-Exupéry, Executive Vice President Sales of the Commercial Aircraft business.

H.E. Engr. Ibrahim Al-Omar, Director General of Saudia Group , said: "Saudia has ambitious operational objectives to meet growing demand. We are increasing flights and seat capacity across our existing 100+ destinations on four continents, with plans for further expansion. The progress of Saudi Vision 2030 is attracting more visits, tourists, entrepreneurs, and pilgrims each year. This motivated our decision to secure this significant deal, which will create jobs, increase local content, and contribute to the national economy."

“The new additions of the A320neo family aircraft will play a vital role in contributing to Saudi Arabia’ ambitious Vision 2030 plan,” said Benoît de Saint-Exupéry, Executive Vice President Sales of the Commercial Aircraft business . “It will enable Saudia Group’s strategy to advance the Kingdom’s aviation capabilities while enabling both airlines to benefit from the A320neo Family’s exceptional efficiency, superior economics, highest level of passenger comfort as well as lower fuel-burn and emissions."

Saudi Arabia is creating unprecedented opportunities for global aviation through the Saudi National Tourism Strategy, which targets more than 150 million tourists by 2030. This order with Airbus will play a significant role in strengthening the Kingdom’s ambition of becoming one of the top global tourism destinations.

The A320 Family is the world’s most popular single aisle aircraft having won over 18,000 orders from over 300 customers in all markets. The A321neo is the largest member of Airbus’ A320neo Family, offering unparalleled range and performance. By incorporating new generation engines and Sharklets, the A321neo brings a 50% noise reduction and at least 20% fuel savings and CO2 reduction compared to previous generation single-aisle aircraft, while maximizing passenger comfort in the widest single-aisle cabin in the sky. As with all Airbus aircraft, the entire A320 Family is already able to operate with up to 50% Sustainable Aviation Fuel (SAF). Airbus aims for all its aircraft to be capable of operating with up to 100% SAF by 2030.

@Airbus @SaudiaGroup @Saudi_Airlines @flyadeal

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Saudia Group, represented by Saudia, the national flag carrier of the Kingdom of Saudi Arabia, and flyadeal, the group’s low-cost carrier, has signed a firm order for an additional 105 A320neo Family aircraft.

• United Arab Emirates
• A320 Family

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