Airline Business Plan
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.
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.
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.
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.
The primary issue regarding sourcing is the question of the type and source of aircraft to be employed in the new airline’s fleet.
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
- Fokker 100
- Saab 2000
- 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.
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.
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.
Trucking Business Plan Sample
Use this sample business plan to get your trucking business on the road.
Auto Repair Shop Business Plan Sample
Start up an auto repair shop using this detailed sample business plan.
With Hyundai’s New EX8 Mighty Truck You Can Move Mightier Loads
Hyundai Automotive South Africa’s commercial vehicle range has received a healthy injection with the launch of the new EX8 Mighty truck, boasting several new features and an industry-leading factory warranty that makes it a formidable contender in its market segment.
The new EX8 Mighty – a successor of the previous HD truck – stems from a long, proud and successful tradition of building competitive commercial vehicles with notable strengths in Korea, the rest of Asia and the Middle East.
Assembled at Hyundai Automotive SA’s commercial vehicle factory in Apex, Benoni, The EX8 Mighty joins the ever-popular H100 (also referred to as Hyundai’s “Bakkie”) and the H1 panel van in Hyundai Automotive SA’s commercial vehicle range.
Hyundai Automotive SA’s Commercial Vehicle Division has its own truck body builder on site in Benoni that produces several standard and customized options according to the customer’s specifications. This includes van bodies, dropsides, tippers, tautliners, trailers and H100 tipper conversions. The truck body builder also does all kinds of repair work for customers.
More spacious cabin, better comfort and visibility
Compared to its predecessor, the EX8 Mighty’s interior space has been increased from 2,9m2 to 3,5m2. Storage space for driver and passengers has also been increased to 11,8 litres. Visibility from inside the cabin has been greatly improved by increasing the windshield size – an important feature, because better visibility ensures safer driving. The windshield height has increased by 20mm, and width by 70mm.
Also, the dash has been lowered by 80mm, allowing an increased visibility angle of 2,2 degrees. Interior space has been enhanced by increasing the interior cabin height to 1 490mm. The steering column now has forward-backward adjustment of 60mm, as well as height adjustment of 76mm – an altogether new feature that enables the driver to set the most comfortable and safest driving position.
Greater load-carrying capability
The longer wheelbase of the new EX8 Mighty has increased its versatility as a load carrier and resulted in a longer deck (4 850mm) that allows you to carry more freight and do fewer trips.
The Gross Vehicle Mass (GVM) of the new EX8 is 7800kg versus 7500kg of Hyundai’s main competitors, which also means you can carry more with the EX8 Mighty. The dropside version of the EX8 has a load capacity of 4 tons.
Various load carrying options according to customers’ demands are available, including a tipper conversion, closed bodies for secure transport of goods, and the very practical dropside body that ensures easy loading and off-loading of goods.
To summarise, we have a well-priced commercial vehicle that has:
- An industry-leading factory warranty of 4 years, with no limit to
- the mileage
- An extra 300kg GVM in comparison to competitors
- Service intervals that have been increased to 20 000km in order
- to reduce the cost of ownership.
Five EX8 derivatives, with keen pricing
Hyundai is launching the new EX8 in five derivatives at very competitive prices. They are the:
- EX8 LWB CC R379 500 (excl. VAT)
- EX8 LWB CC (with aircon) R394 500 (excl. VAT)
- EX8 Dropside R413 100 (excl. VAT)
- EX8 Dropside (with aircon) R428 100 (excl. VAT)
- EX8 SWB Tipper R451 500 (excl. VAT)
For more please visit.
Entrepreneur Profiles2 weeks ago
8 Codes Of Success That Helped Priven Reddy of Kagiso Interactive Media Achieve A Networth Of Over R4 Billion
Technology1 week ago
3 Things Africa Must Get Right If It Wants To Leapfrog Into The 4th Industrial Revolution
Business Ideas Directory2 weeks ago
10 Cannabis Business Opportunities You Can Start From Home
Lessons Learnt8 hours ago
What Comfort Zones? Get Comfortable With Being Uncomfortable Says Co-Founder Of Curlec: Zac Liew
Business Landscape4 days ago
How Schindlers Attorneys Became Involved In The Landmark Cannabis Case
Branding1 week ago
Why You Should Prioritise Brand Image
Get Organised3 days ago
How To Multitask Like Tim Ferriss, Randi Zuckerberg And Other Very Busy People
Increasing Productivity1 week ago
Take Responsibility For Your Company’s Culture To Boost Productivity