10 ms·

It blows my mind how people start such big businesses. You must build an airport, hire stuff, buy planes, meet many legal requirements and so on, all costing te

• MarkTanamil 13y ago
  You don't need to build an airport, you rent space in existing airports. Renting in the main city airports is very expensive but the ones further out aren't so bad.
  • cjrp 13y ago
    Some actually pay the airline to service them, as is the case with some of the Ryanair routes.
    • TheCondor 13y ago
      Those are the exceptions to the rule. How many planes and routes do you need to even merit consideration at a major airport? To organically grow, you'd need to find desirable and under served routes between smallish airports, build a loyal following, then maybe you take a risk, borrow money and attempt to move mainstream. Not impossible but it seems like you'd need just tons of money. Is there much room for value add and innovation? The most obvious area I can think of off the top of my head would be an airline that did all their own security and skipped tsa but I don't know if that's allowed and I think the work would be akin to building your own airports.
• deleted 13y ago
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• rokhayakebe 13y ago
  I always thought I was very ambitious, granted "my ambitions far exceeded my talents." When I stood there under the Eiffel Tower, I felt like I never had a grand thought in my life. To think that massive undertaking started in someone's head is just humbling. So I feel you. I feel so small.
• arethuza 13y ago
  You don't need to buy planes - leasing is a pretty common option - there are even lease options ("wet leases") that cover the plane, crew, maintenance and insurance: http://en.wikipedia.org/wiki/Aircraft_lease#Wet_lease http://en.wikipedia.org/wiki/Aircraft_lease#Wet_lease e.g. EasyJet started with 2 wet leased 737-200s: http://en.wikipedia.org/wiki/EasyJet#Origins http://en.wikipedia.org/wiki/EasyJet#Origins
  • bulte-rs 13y ago
    The problem with wet leasing is that it doesn't scale. Try operating an airline with 300 planes under wet-lease and still make a profit.
    • cjrp 13y ago
      MVP, if it gains traction you look at longer-term lease/purchase options
    • pionar 13y ago
      Why does it have to scale? Maybe it's not meant to scale. Not EVERYTHING IN THE WORLD HAS TO SCALE.
      • bulte-rs 13y ago
        Yes it does ;) Pivoting in the airline business is difficult, changing from planes to boats is cumbersome; scaling is the only option. (And my planes scaled from toy size to 1:1)
      • joonix 13y ago
        What he/she really means is that it's not profitable. Wet leases are used to fill in gaps for airlines, you don't build an entire airline out of wet leases. If you did you're not doing much other than being a middle man doing bookings for other airlines, and you probably won't be able to compete on price. Major commercial air travel is a commodity business. Where opportunity lies is perhaps in offering air travel solutions that bypass the hassle of airports. Shuttles between SF, LA or Houston and Dallas for example. These are heavily trafficked routes with mostly business travelers who would love to avoid long security lines and drive right up to a plane at a small airport.
• masklinn 13y ago
  > You must build an airport Most definitely not. You do need to rent or buy space (and ideally slots) at a bunch of airports. You can also lease planes.
  • Aqueous 13y ago
    I mean, it's hard to say that getting terminal real estate is any easier than building an airport would be :-)
    • johndavidback 13y ago
      Good point. Which is evidenced by the fact that many airports aren't really 'in' the cities they are named for. Example: Cincinnati's CVG airport is actually in rural Kentucky. Cheaper land.
      • dllthomas 13y ago
        Not just "cheaper land" - also NIMBY because of the noise.
    • deleted 13y ago
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    • masklinn 13y ago
      > it's hard to say that getting terminal real estate is any easier than building an airport would be :-) A budget of "tens of millions" would be eaten by a small airport alone (estimates for extending and overhauling Plymouth's airport to link to international traffic and handle up to 115-seaters are 30m GBP)
  • bane 13y ago
    You can also be a contract airline that fills up routes for other airlines. Lots of the "operated by xyz airline" on weird routes are run by airlines that nobody has ever heard of outside of that notice on their ticket.
    • 13y ago
• rayiner 13y ago
  The key observation is that the airport is built on credit (by the government, not the airline, using bonds), and the airplanes are usually either bought on credit or leased (in which case they are built by the airline on credit). It's an illustration of why banks and bank debt are so important in our economy! This capital-intensive sort of business doesn't happen by an entrepreneur writing a $1 billion check from funds he has on hand.
  • 3pt14159 13y ago
    Well they do still write $1 billion dollar cheques. Otherwise where did the bank get the billion dollars to lend someone else? :) Edit: I think I need to dial down the subtly of my humour.
    • wodow 13y ago
      A bank doesn't necessarily need a billion dollars to lend a billion dollars...
      • fennecfoxen 13y ago
        Yes it does. A bank needs $1.1 billion to lend $1 billion, or they're out of compliance with Federal Reserve regulations. The interesting part is that once they lend the $1 billion, and it's spent on aircraft (etc) and ends up in the bank accounts of Boeing and its contractors and its employees and the raw materials companies... then there's $1.1 billion in the original bank's accounts and $1 billion in all the Boeing accounts and there you go, they've turned $1.1 billion into $2.1 billion. And Boeing-etc's banks' can loan out up to about $909 million with it, and so on and so forth. Which may be what you're thinking of. Now, the bank can borrow some or all of that $1.1 billion. And sometimes they can borrow that from the Fed. But the Fed isn't too big on that, and in non-2008esque-crisis situations tries to discourage it.
        • sp332 13y ago
          Well... The bank could start with half a billion, and lend $450,000 of it. Then whichever bank that gets put into could lend 90% of that again, and so on. After a few times, there's a billion dollars lent from half a billion.
• mmariani 13y ago
  It gets a little easier when a company does not follow some legal requirements. [1] [1] http://www.youtube.com/watch?v=WcrmyWsflTM http://www.youtube.com/watch?v=WcrmyWsflTM
• dekhn 13y ago
  Air travel in the US is a massively subsidized business (the government gives huge amounts of money to Boeing to make next-gen warcraft, then Boeing translates those R&D concepts into airplanes. The airlines were, for a long time, subsidized by air post. Fuel prices are still much lower than they could be. These things are barely directly profitable, but they contribute immensely to the global economy. That's the interesting tradeoff in post-capitalism.
  • uuilly 13y ago
    Defense contracts are not subsidies. They are won by competition with the likes of Lockheed. Most of the money won is spent providing the product or service. The profit margins on defense contracts are not nearly large enough to "subsidize" an airline business. Yes, some R&D crosses over but it's no easy trick. Lockheed does not play in the commercial space at all. Disclosure: Former Boeing Employee.
    • dekhn 13y ago
      I've read enough books about Boeing to say that this is established practice (IE, the people who ran boeing during the 747 period specifically said this internally). Some R&D examples I've seen is the movement of advanced electronics and structural materials from military craft to commercial craft. Boeing and AirBus both benefitted tremendously by their military contracts.
    • tmarthal 13y ago
      I think the point is that at a certain level there are only 3 or so defense contractors that have the infrastructure to bid on and win those contracts. Given that they are not "subsidies", but when there are only 2 corporations that are expected to receive the money, then you must call a spade a spade. If you look at things like the Boeing/Northrop Grumman Tanker contract, then it is hard to fathom that any of the $35B for 180 planes (that's 190M for each plane) wouldn't lead to significant development that could be shared with Boeing's commercial sector.
  • pc86 13y ago
    That's not a subsidy in the true sense of the word, though. It's a company using a massively profitable but specialized industry (blowing stuff up as efficiently/quickly/quietly/spectacularly as possible) to fund a much smaller-margin but comparatively very broad industry (commercial aeronautics).
• nether 13y ago
  My photo sharing app isn't a "big" problem?! There are people running businesses that can actually kill people if mismanaged?!
  • bulte-rs 13y ago
    This was exactly my first thought When I came back to the software industry: "IF I mess up, at least I will not kill 195 people".
• ChuckMcM 13y ago
  Heh, but do you enslave entire worlds in StarCraft 2? I've found that enterprise is like real time strategy games a little bit, there are a lot of things all at the same time that have to be working well for you to be successful, but if you can put your head in the frame of mind that its just a game (or game like) then you can set aside a big chunk of the tension of doing it for real. The Flying Wallendas (high wire act) would have people walk along a tight rope that was 6" above the ground, and then point out that if you could do that you could walk between buildings, it was just not thinking about the 'bad' things that you weren't planning on having happen anyway. So at some level when you're spending millions of dollars instead of tens of dollars you're still not planning on losing it, but recognize that if you do it will be a problem. And you are working through a checklist and getting stuff done and correcting for unexpected events. Some folks find that really invigorating, others find it completely paralyzing.
  • goblin89 13y ago
    Anecdotally, I acquire such a frame of mind after a session of Civilization IV (just tried recently, never played strategy video games before). Everything looks like time or resource investment with a goal, and I feel a bit detached emotionally when making choices. I guess I should be worried that this feels unusual :)
    • lotyrin 13y ago
      Maybe growing up playing those kinds of games is why I now feel like everyone is nuts with the way they make decisions.
• mathattack 13y ago
  High barriers to entry are actually considered a positive for a business. If it's hard to enter, you won't have new competitors casually trying to encroach just because margins look attractive. Of course the airlines have issues with barriers to exit too, which come with their own problems. The interesting thing to me is how a vendor is trying to create demand by encouraging the creation of customers. And it's not a new world tech company that's doing this.
• csomar 13y ago
  Not really. A new airline just started in my town and there is no need to build an airport or buy planes. The total startup capital, if I remember was around $3 million and then they raised double that a year later on the stock market. They are not profitable yet but they are pretty competitive with the old/only airline in the country.
  • notahacker 13y ago
    That $3 million doesn't get you much of an airline without some guarantee of profits on the route you're looking to operate though - leasing a 15 year old 737-800 for a year would use up most of that money before you'd even considered getting it off the ground.
    • csomar 13y ago
      Lately, they leased an Airbus A330 for $30k/day (that is $11m). They are also leasing multiple other planes. I guess it's manageable since they are making money from tickets. I forgot to mention that they enjoy no competition in my town (basically they revived the town small airport) but not much on the rest of the country (being sabotaged by the national airline)
      • notahacker 13y ago
        I'm going to infer (mostly from the country code in your profile contact) the airline in question is Syphax. If the headline figures I've seen are correct, their IPO sold nearly half the company for approx ~$15 million (or about three month's revenue according to their Q2 figures) in working capital. They have 6 aircraft on order with Airbus which will cost them something in the region of $300 million over the next few years (which they'll probably fund with a sale/leaseback arrangement with an aircraft leasing company because another IPO wouldn't even scratch the surface...) Those figures give you an indication of why it's easy to get the economics of a startup airline wrong. Imagine Silicon Valley working on those numbers!
  • armenarmen 13y ago
    In what country?
• w1ntermute 13y ago
  > it must be profitable The airline industry as a whole is not. It's lost about $60 billion since deregulation in 1978.
  • powertower 13y ago
    I've read a report by an insider who claims that the unions negotiate a payout of 97-99% of the projected total profit (or revenue sans some given costs) the airlines make, when it's contract renewal time. This kind of makes it difficult for the airlines to make anything, especially on the down years that don't match projections, when they end up paying out over 100% (and end up having to borrow money, or get bail outs).
• deleted 13y ago
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• 27182818284 13y ago
  If it makes you feel better, you can say the same thing about No. 2 pencils. Imagine all of the de-forresting infrastructure, shipping, carbon processing, glue, rubber for the eraser, etc. All of those different experts and workers you have to hire. The money you need for the bulldozers, ships, etc. That's the power of the modern age :-)
• radiusq 13y ago
  > You must build an airport I'm pretty sure you don't need to build an airport to start a new airline.
• mpg33 13y ago
  I don't you need to build an airport to own an airline...or am I mistaken?