4 Reasons Why Start-Up Airlines Fail or Succeed

There are over 150 airlines planned for operations but yet to start trading. Europe is the most popular destination for budding Aviation leaders, however the past decade has seen an increase in start-ups from all over the world.

In 2017 alone, 79 new airlines went to market and 29 went out of business; the negative trend continued into 2019, when 23 carriers ceased operations due to bankruptcy. Last year saw the demise of Thomas Cook, flybmi, WOWair and many other well-known names and new ventures.

VHR looked at the reasons behind the success and failures of start-up airlines.

4 Factors Determining the Success of a New Airline

1. Lack of Resources

Started in November 2018, California Pacific lasted only three months before ceasing operations. The small regional American airline had a fleet of only four planes and flew to eight destinations. Almost ten years in the making, California Pacific struggled to achieve FAA certification, and the progress toward launching services was further hampered by a lack of available aircraft to lease or buy.

A pilot shortage was the final straw for the carrier, when two months of cancellations led to brand damage and lack of passenger demand, and the airline wound down in January 2019.

2. Internal Operations

Infamous start-up ValuJet lasted only three years. Notorious for its dangerous cost-cutting measures, the carrier prioritised finances over worker and passenger safety, which ultimately led to its downfall. Staff received scant and infrequent training, contract workforces were improperly managed, internal communication was inconsistent and the company’s entire fleet of aircraft was purchased already used from other carriers

In addition to poor operations, the airline neglected to listen to customers, market experts and industry authorities. In 1995, the military refused ValuJet's bid to fly military personnel over safety worries, and the FAA wanted the airline to be grounded. However, the fatal crash of Flight 592, which exploded in Florida due to faulty oxygen generators that were scheduled to be removed, saw the grounding of all flights in 1996.

3. Planning

A sustainable business plan is key to launching any new venture, but planning is particularly vital to building a successful airline. Boeing lists the following considerations for potential CEOs before take off:

· Market analysis

· Competitor analysis

· Branding and positioning

· Operational strategy

· Management team experience and fit

· Exploration of risks and obstacles

· Financial projections

· Implementation strategy.

In April 2016, start-up FlyKiss met its end before it had even begun operations. The carrier was designed to connect cities with limited travel links, however a confused proposition of non-stop and one-stop services, longer flight times due to indirect routes, and a niche of a few small city destinations in England and France served only by 49-seater jets did not receive enough demand to launch. FlyKiss had sold several tickets well in advance, leaving multiple passengers in the lurch when it was cancelled.

4. Differentiation

Launching in June 2018, a new Canadian low-cost airline from parent company WestJet, was voted the world’s best start-up airline by CAPA Centre of Aviation. Swoop won the title for creating a brand within a brand by successfully introducing the ultra-low-cost model in Canada on a large scale.

Swoop’s business model is based on ‘ultra-customisation’ to make travel more affordable and accessible to individuals and families of all income levels. Passengers only pay for their seat, with complete control over adding in-flight food, Wi-Fi or check-in baggage for an additional cost if desired. Swoop’s personalisation model empowers customers to travel the way they want, every time they fly. Fuel efficiency is favourable to consumers looking to minimise their carbon footprint, and further helps cut costs and deliver customer savings.

To thrive in competitive environments, start-ups must find a true gap in the market and capitalise on it with unique services that add value to the customer experience. Differentiation of brand and business model saw Swoop transport circa 1million passengers during its first year of service.

Explore the Aviation Challenges & Market Report for 2020.

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