So, you are considering building or buying an airline?

In every country of the world, there is nothing that we know of that is so over-regulated and complex as an operating airline. What is the first thing you will need? For most of our clients it’s an initial requirement for delivering a well written professional business plan to potential lessors and lenders.

Feasibility Studies & Business Plans

Be sure you know what you want and what to expect when pursuing a new venture. A lot of time, resources and hard money can be saved in knowing what to do, what not to do and the order in which to do it. A good rule of thumb is to never commission a business plan until a feasibility study has been written.

A feasibility study is normally less than 40% of the cost of a formal business plan and although a feasibility study will not be anywhere close to the in-depth “nuts and bolts” view of a business plan, it will do exactly what the name implies. It will show if a project is feasible before other steps are taken or indeed paid for.

The differences between a feasibility study and a business plan.

A feasibility study is designed to discover if a business or project is “feasible” or  not: (In short, does the business or project warrant further investment of time, money and further study or is it a non-starter?) A feasibility study is a relatively inexpensive way to safeguard against the wastage of further investment.

If a project is seen to be feasible from the results of the study, the next logical step is to commission a full business plan. 

Will the investment made in the feasibility study itself then be wasted? No, because the research and information uncovered in the study will be of good use in the business planning stage and will reduce research time and therefore the cost of the business plan.

A business plan is designed to “plan” in advance how a business or project will be started, implemented and managed: (In short, a working “blue print” for the entire operation of the business or project). Business plans are commissioned for one of three reasons: Reorganization, investment / funding or a management blueprint for new operation. 

Man never plans to fail, he only fails to plan!

BUSINESS PLANS  

A Business Plan is a detailed blueprint for building a given company. A business plan contains all that the Feasibility study has plus specific time-lines, detailed budgets with monthly and seasonal forecasts, letters of intent, resumes of staff, background, competition, strengths & weaknesses, work sheets and a full notations, appendix and all related and required documents that will be referenced as the company is being developed. 

A well-written business plan will show what revenues can be expected and when to expect them, what overheads and expenses will need to be paid and exactly when they will be due. It will also show staffing levels and salaries along with costs of employment, sales levels with monthly and seasonal trends, setup costs, building/office costs, utility and telephone costs, legal, insurance and accounting costs, office furniture and supplies costs and a myriad of other cost projections as well as legal requirements and conformation to regulations.

In addition to the revenue projections and costs, the business plan will feature sections on demographics, sales and sales methodology, objectives, expansion plans, contingency exercises, product and services market introductions, regulatory requirements and the  laws of City, State and Federal governments relating to the business / project and much more. A well-written business plan can help maximize potential and minimize overheads, liabilities and risk associated with any project.

Over the years we have written many feasibility studies and business plans for new and expanding airline operators. We have started several airlines from scratch and are able to offer hands-on assistance and support from day one until the project is complete.

We can assist in writing your business plan and when complete, can present it to banks and lessors worldwide.

What does a Business  plan show and why do your need one?

First, let’s imagine that you have a valuable aircraft you are offering to new and existing operators for lease. What is the first thing you want to know? Of course, can the client ( lessee) make the payments? Can he succeed and remain in business for the term of the lease? Can I expect to have my aircraft returned in as good condition as when delivered?

These are the practical every day considerations of any lessor. The lessor is predictably most comfortable leasing to old, well established air carriers and conversely, he is the least comfortable leasing to a start-up. In fact, many Lessors simply will not provide aircraft to start-up air carriers. What lenders and lessors absolutely deplore and are frightened to death of is having to repossess their aircraft. Default is the big scary word that haunts the dreams of lessors and secured parties worldwide. 

For any new carrier approaching a lender or lessor, the single document that means the difference between a positive or negative decision is 100% , the Business plan. If the plan is well written and the lender and his advisors can see clearly in acceptable format, exactly how your new company is going to succeed, make the payments and avoid default, you have a chance. 

Your plan has to show, in standard airline terminology and acceptable, recognizable format, a minimum of five year, month by month financial projections reflecting every possible overhead contrasted against variable revenues. 

The plan has to introduce your staff and contain detailed resumes on all the key personnel and principals. The marketing plan has to show in detail how you will penetrate the proposed markets and allow your reader to see that you do indeed understand the mechanics of the business. 

An airline is exactly equal to the sum of its parts and no more. You will have to show how you intend to operate and maintain the aircraft. Where and how they will be maintained, a detailed list of equipment that you will be providing for ground servicing is required. Comments on spares, tooling, hangars and storage are necessary. You will have to show exactly where you will locate current and qualified pilots, where they will be trained and what you intend to pay them. 

The selection of suitable cabin staff and who they will be trained is also required, same with your counter and reservations staff. There has to be a very detailed set of projections indicating the number of employees that you will have to retain both initially and as the operations grows. 

You will have to have letters of intent included in the appendix from all the relevant parties. For example, you will need a letter from the civil aviation authority under which you will be operating indicating that they have reviewed and are in accord with your plans. Similar letters from the airport authorities along your proposed routes are required. A letter from an insurance broker is an additional requirement. In fact, for every statement in the plan there has to be back- up documentation in the appendix. 

The plan has to detail every single area of the company so that Lenders and Lessors can have confidence that you do in fact, have a very clear idea of exactly what is required for success. Absent a plan that reflects all and more of the above, you will have little or no chance of being judged lease or loan worthy. 

Remember, there are literally and easily at least 100 of hours of detailed number crunching work in any Business Plan that is worth the name. Do not expect to have a reasonable plan delivered for a promise of some nebulous reward in the future. We approach each client on a personal and professional basis. We will devote weeks of our time to your project. We are a work for fee company not snake oil salesmen, brokers or commissioned agents. We ask for 50% of our fees in advance with the balance on delivery based on a detailed performance agreement. There are only a few companies in the world actually capable of doing what we do and we are the only one who have actually done what we tell others how to. All of our personnel are lifetime hands-on professionals not college kids hired by a New York consulting company. A poorly written Business Plan is valueless and will not be given  consideration in the commercial aviation world. 

Now, assuming that you still want to get into this business, please read over the following and, if you can provide logical responses,  send me an initial letter and we will get back to you with a reasonable proposal to write your Business Plan and help you get into operations. 

Partial and initial List of items required for Business Plan

Type of aircraft considered, LOPA,( mixed config?) Cargo, Passenger?

Who is the competition? What aircraft do they operate?

Where do you want to go, proposed routes? 

Typical initial salaries you might propose, Captain, FO. FA's, Mechanics office staff, officers, etc.? 

Director of Operations, Chief Pilot;  experience, licenses,  names and CV 

Director MX, CV, Name and salary? 

Hangar costs, Ramp costs, gate and counter costs? Can you sub these out? 

Office & utilities costs? How much office space do you foresee initially requiring? 

What would be your estimated set-up costs for ( communications) office , reservations, etc.? 

Internet connections costs in your area? What would it cost to wire your proposed offices? 

ATC charges, if any (Euro-control) 

Hourly MX costs estimated for routine and non- routine MX on any existing or proposed aircraft? 

Reserves that you do or would set aside for the above? 

Salaries or compensation of management team and owners? 

Airworthiness certification of any existing aircraft. Registration, 

Bill of sale, present valuation, specs, photos of any aircraft owned or controlled presently?  

Copy of your AOC ( if you have one at this time) and other government permits and licenses. 

Photos of the principals, photos of offices. 

Per month, proposed, total time, total cycles, How many flights would you operate/ month  

A verifiable letter from your  bankers indicating initial capitalization & net worth. 

Copy of the incorporation papers for your company. 

Where would your employees and pilots live? Could the pilots commute? 

Copies of all existing employees’ resumes and licenses?   

Are they or would they be expatriates? 

What are the nationalities of the principals? 

Who owns the company? Principal stockholders? 

What are the assets of this company, Real estate, property, securities, cash in banks? 

How long has the company been in existence? 

Copy of any existing Business plan? 

Years in business?, Experience of the principals in aviation. 

Where chartered? State of incorporation? 

Value of assets? 

CV's of principals. 

Net worth of Principals?, 

Financial statements for principals? 

Will Principals sign personally on any loan? 

Value and details of all assets? 

Money in banks, securities, etc.? 

Accounts receivable monthly and copy of revenues and overheads last year. 

Revenues monthly (total) 

Number of employees? Now and when in operation 

Salaries of principals and employees? 

Number of pilots &Mechanics? 

Company mandatory experience minimums for captains? 

Location of offices when in operation, mailing  and street address? 

Any insurance claims to date, if yes, details? 

Name and contact info of Insurance broker? List of claims? 

What would you charge for typical tariffs? Passenger and cargo? 

What do you factor as costs: hourly, Airframe, crew, insurance, fuel, G&A, etc? 

How much do you estimate to earn as a monthly gross and net from the operation. 

What are total net earnings of the company presently, monthly, annually? 

Can you identify the client base, your market? 

Remember whatever the Business Plan states in the text, must be proven by documents in the appendices. 

These are some of the items and questions that would be required in any Professional Business Plan Remember, to successfully borrow money or someone else's aircraft, the lessee or borrower has to be transparent, honest, forthcoming and completely reliable. It is the aim of the well written Business Plan to create this impression.