Airline V-plan

start me up is a consultancy service, bringing together the many elements necessary to launch an airline.

Developed by Airbus - and based on wide knowledge and expertise - the ‘Airline V-plan’ is a 17 step-plan to guide entrepreneurs from ‘airline idea’ to ‘take-off’ with ‘go/no go’ check-point.

The Project Feasibility step will determine whether the basic airline idea can "fly." A preliminary study is undertaken to establish the viability of the investors or entrepreneur’s idea. It will examine the proposed market, the growth potential, existing competitors and prevailing market dynamics. If the idea passes this initial feasibility test, it will carry over to the business planning stage.

The Business Plan
In modern airline management, there are a number of different formats for a successful and practical business planning and airline launch. The formats that we recommend to our clients will largely depend on the complexity of the organization, products and services, and on those that will consider and use the business plan (i.e., investors, founder, management, Board of Directors, etc.)

A basic outline of the business plan is presented below:

• The opportunity
• Market analysis
• Competitive analysis
• Marketing strategy
• Network structure
• Distribution strategy
• Fleet plan
• Capital requirement
• Financial strategy

Market Analysis
The most significant part of any business study is proper market analysis with forecasts and recommendations. The Airbus Global Market Forecast gives a broad analysis of the global traffic developments and year-by-year fleet evolution of the world’s largest aircraft operators. It also focuses on the demand for passenger cargo aircraft over a certain period.

One of the key drivers of a successful airline is its network and schedule. The business plan will determine the optimal model, whether hub and spoke, point-to-point, feeder, charter, etc. This will be used to determine the network strategy - routes, frequency, aircraft type and aircraft capacity among other factors.

Analysed in parallel with the network and business model will be the aircraft fleet for the new airline. Airbus offers a wide choice of aircraft suitable for every airline concept and network - domestic, regional and long-haul. The aircraft evaluation step will examine the aircraft costs, revenue, capacity (passenger and cargo), performance, technical fit and profitability.

The commercial aviation industry over the past few years has gone through cycles of both positive and negative commercial trends, with many uncontrollable factors exerting massive pressure on operating expenses and costs. These cycles have allowed some carriers to achieve prosperity from the situation at hand, thanks to their pragmatic and innovative approaches to modern airline business practices while others have taken their toll. Substantial financial losses were reported, including bankruptcies - some carriers were even forced into liquidation.  

Fortunately, however, people will likely always fly more and more. As individual state economies open to the global market, so will the need for quality and safe air travel across the meridians. Finding the right business formula while carefully controlling the financial aspects of the operation should ensure that new and existing airlines continue to achieve their passengers, but also shareholders’ objectives - even during difficult times. The progressive deregulation of the aviation industry in most countries for example, opens many new opportunities to entrepreneurs with multiple airline concepts and models to choose from and implement. 

The current business models are (non-exclusive):

• Low-cost carrier
• New world airline
• Full-service airline
• All-premium class airline
• VIP charter operator
• ACMI operator
• Fractional ownership

Financial analysis refers to the assessment of the economic viability, stability and profitability of the future carrier or aviation venture. This detailed analysis will help the investors or the entrepreneurs decide whether to progress with the business model and the materialization of the idea or invest funds elsewhere.   

A detailed financial plan will be built outlining the following elements and providing the entrepreneur with the expected level and length of return on investment:

• Estimated market share
• Fare pricing
• Load factor
• Expected operating revenue
• Profit potential
• Sensitivity analysis of profitability
• Cash flow
• Balance sheet

By this stage, the new airline project will reach a vital crossroad: the “Go/No Go” decision. Principals will need to decide whether the levels of profitability forecast and the level of risk foreseen will merit the investment they are about to make.

If the answer is “go,” start me up moves forward with concrete plans for setting up the airline. An exciting, yet long and tough road now lies ahead, before the first passengers board and first flight leaves the runway. A period of intense research, analysis, planning and consultations will lead to the ultimate goal : a successful, stable, competitive and growing new airline.

However, if all conclusions point towards a negative outcome, investors and entrepreneurs can rest assured that the minimal investment were made during the business evaluation of their concept and idea, and was money well spent.

Choosing the right aircraft type is another critical part of launching a new airline. The evaluation process of the business plan will recommend the best aircraft type for the particular airline concept, capacity, cabin layout and cost/profit levels, as well as acquisition options. At this stage, investors and entrepreneurs should concentrate on the process of acquiring aircrafts and securing delivery slots for new airliners. To learn more about the Airbus aircraft family, view our aircraft family page.

Certain business models may recommend the acquisition of used aircraft or acquiring aircraft on lease – either prior to new aircraft delivery or as an initial soft-launch approach. Airbus can assist new airlines in aircraft sourcing, acquisition and delivery management. The customer will be provided with comprehensive reports on aircraft conditions - including value assessment based on aircraft market value, maintenance records history and documentation, as well as physical inspection reports.

The Air Operator's Certificate (AOC) in a JAR-OPS environment (or Air Carrier Certificate in the U.S.) is an official document issued to an airline by the state civil aviation authorities. This certificate is crucial and mandatory for any airline business – it affirms the airline’s competence and readiness to conduct safe operations in a well-organized and planned manner, clearly defining responsibilities in various key posts within the company.

The possession of a valid AOC is one of the main legal requirements for any new airline before it can obtain an operating license. Regulative authorities will closely scrutinize a business plan at this stage.

Furthermore, the regulators will seek to meet and approve all of the post-holders of the new airline. Attention will be given to the level of practical airline experience each post-holder has and the familiarity with the latest safety and operating practices.

Depending on which authority the operations will be conducted under, a series of manuals will need to be compiled, produced and submitted for approval during the AOC application process. These include:

• Operations manual
• Safety manual
• Ground operations manual
• Maintenance manual
• Security manual
• Performance
• Weight and balance
• Minimum equipment lists

The start me up team offers its expertise in managing the entire AOC application process together with the airline principles- from meeting the authorities, compiling the manuals and ensuring compliance with international laws and regulations, as well as those of the issuing state - to recruiting the key post holders and evaluating the competence and expertise of the existing team members.

Without the right people in place, a good business model and plan is destined for failure. Recruitment must be a strategic process that brings the best people into the new airline. It is fundamentally important that candidates and future team members are carefully selected based on what they will offer the company - their skills and ability to accomplish goals and objectives of the management, attitude, experience and drive for success. The chosen candidates will be the key asset of the new airline and will directly impact several crucial factors, including morale, motivation, respect, retention, quality of service projects, relationships with partners and the community, funding and investment and general ability to successfully deliver plans and growth goals and development.

The business capitalization is the de facto financial planning stage for the airline. It details the financial requirements and the potential of the business opportunity. The plan will elaborate the anticipated start-up cost, operating expenses and the profitability potential among others. The financial plan is also crucial in identifying and quantifying the financial requirements for starting the operation, as well as the allocation and control of funds and funding thereafter.

Airline operations are heavily dependent upon human capital, therefore choosing the right team is decisive for launching and maintaining a successful aviation business.

When quality of services is the most powerful instrument of passenger retention, repeat business and sales in general, staff satisfaction and corporate stability is seen as a vital factor in any successful business. Stability can be achieved by proper human resources management and forward planning, including the allocation of funds for competitive salaries and packages, perks, benefits and social and personal security.

Adequate business facilities are another important element of a successful airline operation. The start-up airline should project future staff requirements, sales office requirements, crew rest and training facilities, maintenance and storage facilities, equipment and transportamong other aspects of the business.

The Operations Plan stage describes the physical necessities of the business operation, such as the physical location, facilities, staff and equipment. Depending on the chosen airline concept (scheduled/non-scheduled passenger or cargo airline, low-cost airline, VIP charter operator), it may also include information about inventory requirements and suppliers.

• Labor
• Pay rates
• Benefits
• In/out-sourcing
• Administration
• Distribution
• Airport operations
• Customer service
• Maintenance (line, light, heavy)
• Ground operations
• Dispatch
• Flight operations
• Training
• Fuel purchasing/hedging policies  
• Inormation Technology
• ETOPS (if applicable)
• Cargo/freight/mail
• Facilities/equipment

Building the team
By combining the extensive resources of Airbus and its companies with specialised aviation recruitment consultancies, start me up will help the new airline build its core management team with the finest candidates available – who will in turn work towards filling the rest of the functions of the organization. This stage will focus on:

• Organization charts
• Executive recruitment
• Board of Directors

Airline set-up core functions
The important tasks in the airline initial setup will be handled by a number of senior and key post-holders within the new organization. During the AOC process in particular, the following departments will need to be established and productive:

• Safety and security
• Maintenance and engineering
• Ground operations
• Flight operations
• Training
• Commercial
• Planning and strategy

The final stage before take-off is also one of the most complex. Start me up can assist with the entry into service planning and management:

• Initial spares provisioning
• Retrofit services
• Flight operations planning
• Ground operations planning
• ETOPS planning (if applicable)