How to Start an Airline

Executive Summary

Starting an airline is exceptionally difficult because it combines high capital needs, complex regulation, and thin industry profits. The video’s central argument is that a new entrant is unlikely to beat established full-service airlines at their own scale. Instead, it needs a distinct business model, enough funding to reach launch and critical mass, regulatory approval, and a practical way to obtain aircraft.

The pandemic-era disruption was presented as a possible opening: industry crises can unsettle incumbents and create room for smaller companies to make different strategic choices. Whether new airlines could turn that opportunity into lasting success remained an open question.

Business Playbook and Key Frameworks

• Choose a differentiated business model. A startup must offer something meaningfully cheaper, more convenient, faster, or otherwise unavailable. Trying to recreate a global network carrier is unrealistic: established airlines benefit from scale and could outlast a smaller entrant in a price war.
• Avoid direct competition with incumbents where possible. Target underserved routes or customers, or stimulate demand among people who might not otherwise fly. The video gives three examples:
  • FlyPop: Planned low-cost, long-haul service from the UK to Indian secondary cities without existing nonstop flights, targeting the UK’s Indian diaspora.
  • Play Airlines: Planned low-cost transatlantic trips connecting through Iceland, drawing on the model of the defunct Wow Air.
  • Breeze Airways: Planned “hub-busting” nonstop service on underserved US routes, such as Tulsa–New York and Louisville–Los Angeles.
• Secure funding before committing to major launch costs. Airline financing is unusually difficult: investors face cyclical losses and thin margins, and startups may fail either before launch or because they lack enough capital to reach critical mass.
• Treat certification as a core operating build-out. The company must establish safety systems, manuals, training, and other internal processes—not merely submit an application. Acquiring an existing certificate may be an alternative, although it can face opposition.
• Use leasing and sale-leasebacks to manage aircraft costs and timing. Leasing can reduce upfront capital needs, provide access to aircraft faster than manufacturer orders, and limit exposure if capacity needs change.

Key Metrics and Costs Cited

• Industry operating margins: About 4–5% over the 25 years before the pandemic, compared with roughly 25–30% for the railroad industry.
• Play Airlines: Secured $42 million from Avianta Capital.
• FlyPop: Its investor makeup was unclear; a major funding source was a UK government fund for innovative businesses affected by COVID.
• Breeze Airways: Raised $83.3 million through venture capital, with its founder’s prior airline-startup track record cited as a likely factor. The video also describes Breeze as launching with about $90 million in funding.
• US Part 135 certification: Approximately $35,000–$95,000 in legal fees, plus about $50,000 in other expenses.
• US Part 121 certification: A non-FAA-endorsed consultancy listed a fee of $1.2 million for a package that included preparing operational materials and managing the application process. The video notes that there were only six FAA-endorsed Part 121 certification consultancies and 104 active Part 121 airlines in the US.
• Aircraft leasing: Around 50% of commercial aircraft globally were under lease.
• Airbus backlog: About 7,000 aircraft as of December 2020, implying long waits for direct orders.
• Breeze aircraft strategy: Its planned A220-300 aircraft had a list price of about $90 million each. Breeze ordered 60 and arranged for five to be sold to Voyager Aviation Holdings and leased back.
• Cape Air example: A large Part 135 scheduled operator, with a fleet of 94 nine-seat aircraft, serving mainly smaller government-subsidized destinations in the US and Caribbean.

Operational and Regulatory Considerations

• In the US, a Part 135 certificate is generally used for charter and some scheduled services. Scheduled operations are typically limited to aircraft with nine or fewer passenger seats, subject to exceptions. Its requirements are generally less stringent than Part 121.
• A Part 121 certificate is used by large commercial airlines and requires extensive safety infrastructure and documentation. Breeze initially sought to acquire the certificate of defunct Compass Airlines, but withdrew the plan following pushback from other airlines and Compass’s pilots’ union, and proceeded with its own application.
• Aircraft access is often easier than the other startup hurdles. Leasing spreads costs, avoids some debt and ownership exposure, and can offer aircraft sooner than a manufacturer order. Sale-leasebacks can provide access to newly ordered aircraft while delivering lease-like economics.
• COVID-related fleet reductions made some aircraft types more available. The video notes that American Airlines and Air Canada retired 20 and 14 E190s, respectively. Increased availability of a type can put downward pressure on lease prices.

Main Takeaway

The four major startup hurdles identified are business-model selection, funding, certification, and aircraft acquisition. The first three are especially difficult to solve before launch, while aircraft leasing and sale-leasebacks can reduce the initial capital burden. Hiring, offices, airport space, and marketing are also necessary, but the video argues that mistakes in the four core areas are more likely to determine whether a startup airline gets off the ground.

Presenter and Sources

• Presenter/channel: Wendover Productions
• Writing: Sam Denby
• Research: Sam Denby and Tristan Purdy
• Examples discussed: FlyPop, Play Airlines, Breeze Airways, Virgin Australia, Cape Air, Compass Airlines, and Voyager Aviation Holdings
• Other reference: Warren Buffett, cited in the context of investment in airlines versus railroads