Here's an investment banker joke I've been hearing oddly often recently: "How do you get a million dollars?" -> "Invest a billion dollars in the airline industry".<p>On a more serious note: there's a lot of talk on this page about the finance and logistics of starting a company like this - but I think the human factor is also worth mentioning. I fly a moderate amount, and whenever I have an hour or so to spare on a layover, I try to find interesting people to talk at the bar. While I've had varying levels of success, last layover at O'Hare, I spoke to a pilot who had been with a major airline for about a decade.<p>Having seen "Catch Me If You Can" and surmising that the situation must have changed, I asked him about his job. That was the most dismal response I've received from that question. We talked for about half an hour about how terribly pilots are treated, and how (maybe a bit of an exaggeration) a good number of beginner pilots for airlines are on food stamps because they're paid so poorly. I asked about benefits, and his response was, "just about every benefit you can think of is basically unusable." I asked him why he did it, and he told me that flying was like a drug.<p>Pilots are responsible for lives, and I'd feel a lot safer if my pilot was paid enough to survive. Yet, with dwindling margins and a thriftier consumer base, it's going to take <i>a lot</i> to disrupt this industry. In reality, I don't see anything major happening without some drastic innovation that cuts associated costs significantly in order to build up that margin.
There's a saying in the airline industry that goes something like this: "What's the fastest way to become a millionaire in the airline industry? Start with a billion dollars."<p>I don't work in the airlines, but I'm a private pilot with lots of friends and family who do work or have worked in the airlines (and in the aviation industry in general).<p>Expenses are high and often unpredictable, and profits are low. A lot of airlines operate on incredibly thin margins, where only one problem could push them into bankruptcy. Back in 2008, Frontier Airlines had to go into bankruptcy (and was ultimately acquired by Republic) due to a dispute with its credit card processor. <a href="http://en.wikipedia.org/wiki/Frontier_Airlines#Bankruptcy_and_acquisition_by_Republic" rel="nofollow">http://en.wikipedia.org/wiki/Frontier_Airlines#Bankruptcy_an...</a><p>Competition is also fierce and is almost entirely price-based. While there have been a few attempts at competing on other metrics (there were several attempts to start business-class only airlines in the late 90s and early 2000s) have almost universally failed. In fact, the only one I can think of currently is OpenSkies, and it is backed by a major airline (British Airways).<p>It's also (as you would expect) a very complex regulatory and legal environment. Simply getting off the ground can take years of work.<p>I have idly thought about a small airline that would connect a handful of smaller towns across the Southeast that lack affordable or convenient air service to larger airports, where they could interconnect with the majors. But when I even begin to look at the numbers, despite what an exciting idea I think it could be, I know there is no way it would be successful.
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 tens of millions of dollars, and on top of that, it must be profitable. This gives some insight, but still it's terryfing. I feel so small.
The airline industry has the lowest return on invested capital of any industry: <a href="http://centreforaviation.com/images/stories/2013/jul/05/ROIC4.PNG" rel="nofollow">http://centreforaviation.com/images/stories/2013/jul/05/ROIC...</a><p>This analysis from McKinsey is worth a read: <a href="http://www.iata.org/whatwedo/Documents/economics/Profitability-and-the-air-transport-value-chain-final.pdf" rel="nofollow">http://www.iata.org/whatwedo/Documents/economics/Profitabili...</a>
Will there be airplane purchases involved?<p>at least they give a handy price list.<p><a href="http://www.boeing.com/assets/pdf/commercial/startup/pdf/business/prices.pdf" rel="nofollow">http://www.boeing.com/assets/pdf/commercial/startup/pdf/busi...</a><p>These planes aren't cheap. More than a AWS, digital ocean and a linnode combined!
This is very cool. I'm sure I'm not the only one who has fantasized about starting an airline and doing it 'right' after an annoying flight. Probably not going to happen but at least I can read about it now.
Although going big is interesting, I am surprised no one has brought up <a href="http://www.surfair.com" rel="nofollow">http://www.surfair.com</a> when thinking about starting an airlines. They seem to be doing well and although i do not have a membership (live on the east cost) I think it would be interesting to do the same thing from DC to NYC to Boston as I would be down for that!
There's been a big boom in small, regional jet airlines over the last few decades (Low Cost Carriers, or LCCs, sometimes known as Low Cost Regional Carriers). A lot of companies saw what Southwest and JetBlue were doing and figured they could do the same on a smaller scale: control costs by flying limited routes and serving smaller markets, where they could outcompete the bigger carriers on price [1]. Then, if things went well, maybe expand from there.<p>It's an incredibly crowded field now, and even many of the LCCs themselves collapsed.<p>[1] It seems a little counterintuitive, but in the airline business, there is almost a <i>reverse</i> economies-of-scale effect. This is because routes can't be flown on demand, but must be scheduled, and so you're maintaining a fixed supply while dealing with variable demand. You don't have a lot of fantastic levers to pull to deal with fluctuations in real time, because you can't redirect inventory (planes, crews, etc.) on demand, and canceling flights causes chain reactions across hubs and spokes.<p>This is why a lot of the big carriers have been cutting flights and routes like crazy in recent years. Faced with undersupplying or oversupplying the market -- and faced with all their other enormous costs -- they'd rather bet on undersupply. Passengers these days aren't incredibly loyal to any given airline, and they're very price conscious. They won't give you credit for having a bigger network; all they care about is getting from A to B <i>right now</i>, and finding the best price in so doing. So having a bigger network can often be a liability.
There was a fascinating article on HN a few months ago (don't have the link handy at the moment) about how most major airlines make less than 25 cents profit on each ticket sold. It's pretty mind blowing when you consider the entire industry operates on such margins.
My co-founder and I have a combined 20+ years of experience in the airline software industry. When we set out to start our own business, it was clear that we were not going to sell to airlines. Too many legacy systems, too much historically grown cruft, needless complexity, too many individual requirements but no money to pay for it. Plus they're distributed all over the world so selling to them is very costly. It's a shame because we would have had a big head start in terms of domain knowledge.
The problem with starting an airline is that the pilot's union has the leverage to capture all profits: <a href="http://philip.greenspun.com/flying/unions-and-airlines" rel="nofollow">http://philip.greenspun.com/flying/unions-and-airlines</a><p>The key issue is that you don't just need to be certified to fly a 737, you need to be certified to fly a 737 for a specific airline. This makes strikes extremely powerful because you can't easily hire replacements.
One of my favorite childhood games was Aerobiz [1]. Probably not an accurate simulation of starting an airline, but that is what this submission made me think of.<p>[1] <a href="http://en.wikipedia.org/wiki/Aerobiz" rel="nofollow">http://en.wikipedia.org/wiki/Aerobiz</a>