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Expense Calculations For Airline Startup  
User currently offlineJSpos From United States of America, joined Aug 2012, 4 posts, RR: 0
Posted (1 year 8 months 2 weeks 3 days 10 hours ago) and read 6081 times:

Hello,

I'm doing research for an Airline Startup concept I have. I am an Entrepreneur in the Memphis area, and the airline would be based in Memphis TN.

I'm presently seeking candidates for an advisory board to test the feasibility of my business plan and I'm also looking for some general advice for formulas and rules of thumb.

1. I would like to plan around a single airframe - any advice about lease cost vs. efficiency vs. availability. (More than just "stay away from MD-80s" or "there are plenty of inexpensive A319s available" but more details, like X plane is less expensive to lease but more expensive to run, and harder to maintain - but Y plane will save you over the long run.")

I"m looking for a 125-175 single class cabin.

2. Is there a formula to expense maintenance over the life of a plane? (i.e. "Expect X cost per 1000 cycles")

3. What is the minimum crew per plane on a single route? Right now I'm figuring 2 pilots, 2 attendants, 2 gate, 4 baggage, 4 line, and 4 cleaners (ground crew listed represents each end of the run. Of course, at the hub I would think I'd be able to economize on the ground crew per plane - having each ground crew take care of more than one plane.)

4. If I have an 8 planes on 8 runs, can I get away with 1 alternate (always in the shop, on standby) or is there a formula for that too?

What am I missing, what am I forgetting? I don't plan on having ticket agents - more on that later.

Again, I know there are a thousand picayune details that may make my model unworkable, right now I'm looking for big stumbling blocks - hidden huge expenses that I'm not considering.

Thanks for your time, looking forward to your responses.

18 replies: All unread, jump to last
 
User currently offlineJRadier From Netherlands, joined Sep 2004, 4650 posts, RR: 50
Reply 1, posted (1 year 8 months 2 weeks 3 days 10 hours ago) and read 6082 times:

Quoting JSpos (Thread starter):
What am I missing, what am I forgetting?

Basic knowledge in the industry? Not trying to scare you off, but this is fairly basic stuff and a lot will depend on your actual plans and require some proper calculation. I think Aircraft Commerce would be a good start to get some of the data (and no, it's not openly available)



For once you have tasted flight you will walk the earth with your eyes turned skywards, for there you have been and ther
User currently offlineJSpos From United States of America, joined Aug 2012, 4 posts, RR: 0
Reply 2, posted (1 year 8 months 2 weeks 3 days 10 hours ago) and read 6075 times:

Thanks Jurgen, Aircraft Commerce looks like a good source for a lot of that data, I will subscribe. Everyone, please understand that I know I will need expert help in this - positive help would be encouraging.

Jurgen, are you an airline executive or operating officer? Just curious - given your response.


User currently offlineJRadier From Netherlands, joined Sep 2004, 4650 posts, RR: 50
Reply 3, posted (1 year 8 months 2 weeks 3 days 10 hours ago) and read 6065 times:

Quoting JSpos (Reply 2):
Jurgen, are you an airline executive or operating officer? Just curious - given your response.

Jim, hoping to get there, but currently MSc student with work experience in the field. More info on my linkedin  



For once you have tasted flight you will walk the earth with your eyes turned skywards, for there you have been and ther
User currently offlinemandala499 From Indonesia, joined Aug 2001, 6590 posts, RR: 75
Reply 4, posted (1 year 8 months 2 weeks 3 days 10 hours ago) and read 6063 times:

I'd love to help more, but... as the saying goes... no money no honey... (although that advisory board looks nice... if paid...  &nbsp 
Quoting JSpos (Thread starter):
1. I would like to plan around a single airframe - any advice about lease cost vs. efficiency vs. availability. (More than just "stay away from MD-80s" or "there are plenty of inexpensive A319s available" but more details, like X plane is less expensive to lease but more expensive to run, and harder to maintain - but Y plane will save you over the long run.")

Well these kinds of questions, I do based on the planned weights for the route, dig into the flight performance manual for the aircraft, and figure out which one would be cheaper in terms of fuel...
Then, I add maintenance using all in power by the hour (including for heavy checks).
If fuel price ain't a problem, grab some 737 classics... they're available for less than US$100,000 a month (some of the older ones are half that). If fuel price is a big problem, then get some fuel misers (eg: 737NGs or A320x family with the CFM56-5B or IAE V2500-A5s... the old engines are guzzlers)

For 737NGs and A320x, it depends on your average hours per cycle... if it's below 1H15, stay with old planes!   

If those prices are off, well, I haven't checked the lease prices lately. (don't forget the deposits required for the lease...)

Quoting JSpos (Thread starter):
2. Is there a formula to expense maintenance over the life of a plane? (i.e. "Expect X cost per 1000 cycles")

Errr... try X USD per hour...
Power by the hour... ALL IN (including heavy checks)...

Quoting JSpos (Thread starter):
3. What is the minimum crew per plane on a single route? Right now I'm figuring 2 pilots, 2 attendants, 2 gate, 4 baggage, 4 line, and 4 cleaners (ground crew listed represents each end of the run. Of course, at the hub I would think I'd be able to economize on the ground crew per plane - having each ground crew take care of more than one plane.)

Crew? 2 pilots, and 1 FA per 50 passengers... that's per FAA rules.
You must also note their maximum duty and flight hours permitted per day, 7 days, calendar month, and annual. (where I am it's 9, 24, 110, 1050 for flight crew flight hours, FAs are 12hr duty time (flight hours not counted).

In the end, my calculations usually require 3 - 4 crew sets aircraft, but that always depends on the route network configuration... on some of the previous projects, the route network structured required 5 crew sets per aircraft...

Quoting JSpos (Thread starter):
4. If I have an 8 planes on 8 runs, can I get away with 1 alternate (always in the shop, on standby) or is there a formula for that too?

Well, you can mix and match routes etc... just make sure you get enough hours out of the aircraft. I usually aim for 300hrs of flying a month per aircraft.

Back in the days when I used to do a lot of these stuff... the hard part is always cross checking and verifying the assumptions and variables.

Mandala499



When losing situational awareness, pray Cumulus Granitus isn't nearby !
User currently offlineJSpos From United States of America, joined Aug 2012, 4 posts, RR: 0
Reply 5, posted (1 year 8 months 2 weeks 3 days 9 hours ago) and read 6046 times:

Thank you Mandala - that's a huge help. The advisory board doesn't pay yet, but I completely understand - and you've been most generous. I need enough information so I can make sure my model works before pitching investors.

I'll check the FARs for crew requirements - that may be my model's downfall (or it may make me rethink my model.) 24 Flight Hours a week sounds low...will have to think on that.


User currently onlineBMI727 From United States of America, joined Feb 2009, 15454 posts, RR: 26
Reply 6, posted (1 year 8 months 2 weeks 3 days 9 hours ago) and read 6027 times:

Quoting JSpos (Thread starter):
like X plane is less expensive to lease but more expensive to run, and harder to maintain - but Y plane will save you over the long run."

Generally the shorter your flights, the less the total cost is based on fuel. If you're flying a long way, a larger fraction of the cost is fuel, so plan the fleet accordingly. I would think that 737 Classics are a good place to start: cheap to buy, less thirsty than MD-80s, plenty still in service to keep a large maintenance pool, and can reach both coasts from Memphis.

Quoting JSpos (Thread starter):
2 gate, 4 baggage, 4 line, and 4 cleaners (ground crew listed represents each end of the run. Of course, at the hub I would think I'd be able to economize on the ground crew per plane - having each ground crew take care of more than one plane.)

You'd almost certainly want contracted ground handling at each destination to take care of that.

Quoting JSpos (Thread starter):
4. If I have an 8 planes on 8 runs, can I get away with 1 alternate (always in the shop, on standby) or is there a formula for that too?

That's going to depend almost entirely on the route system and schedules. Allegiant, for example, serves 71 cities and 8 hubs with a fleet of about 45 planes. Obviously, they are atypical, but you get the idea.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineJRadier From Netherlands, joined Sep 2004, 4650 posts, RR: 50
Reply 7, posted (1 year 8 months 2 weeks 3 days 9 hours ago) and read 6023 times:

Quoting mandala499 (Reply 4):
In the end, my calculations usually require 3 - 4 crew sets aircraft, but that always depends on the route network configuration... on some of the previous projects, the route network structured required 5 crew sets per aircraft...

Depending on aircraft utilization that seems pretty reasonable, for a LCC style operation I wouldn't be surprised if it goes more towards 5 or maybe even over.



For once you have tasted flight you will walk the earth with your eyes turned skywards, for there you have been and ther
User currently offlinesimairlinenet From United States of America, joined Oct 2005, 904 posts, RR: 2
Reply 8, posted (1 year 8 months 1 week 6 days 13 hours ago) and read 5651 times:

It helps to look at real data! See the tables at http://www.transtats.bts.gov/Tables....ort_Name=Air%20Carrier%20Financial

User currently offlinebond007 From United States of America, joined Mar 2005, 5342 posts, RR: 8
Reply 9, posted (1 year 8 months 1 week 6 days 12 hours ago) and read 5647 times:

Quoting mandala499 (Reply 4):
Crew? 2 pilots, and 1 FA per 50 passengers... that's per FAA rules.

I know Mandala knows it, but just to be sure you do, it's 1 FA per 50 passenger seats, so even if you only had 5 pax on board a 110 seat aircraft, you'd need 3 FAs.

Just my personal opinion, but if you have to ask these questions here, then you probably shouldn't be considering anything like this.


Jimbo



I'd rather be on the ground wishing I was in the air, than in the air wishing I was on the ground!
User currently offlinemandala499 From Indonesia, joined Aug 2001, 6590 posts, RR: 75
Reply 10, posted (1 year 8 months 1 week 6 days 11 hours ago) and read 5628 times:

Quoting bond007 (Reply 9):
I know Mandala knows it, but just to be sure you do, it's 1 FA per 50 passenger seats, so even if you only had 5 pax on board a 110 seat aircraft, you'd need 3 FAs.

Or he can just shove 19 seats and not have an FA at all!   

On the non techops side...
Make sure you got the GDS costs (per pax basis), expected yield management model (basic n generic) so you can model the revenue... yield factor and load factor growth, etc....

Quoting JSpos (Reply 5):
I'll check the FARs for crew requirements - that may be my model's downfall (or it may make me rethink my model.) 24 Flight Hours a week sounds low...will have to think on that.

Download FAR 121 for those requirements...



When losing situational awareness, pray Cumulus Granitus isn't nearby !
User currently offlineJSpos From United States of America, joined Aug 2012, 4 posts, RR: 0
Reply 11, posted (1 year 8 months 4 days 8 hours ago) and read 5212 times:

Thanks Jimbo - I appreciate the advice, but I don't agree with your last statement. I'm looking at all avenues of information gathering. Business is business and it starts with research, I can hire experts when the time comes. I'm more of a synthesist. and hopefully NOT being an industry insider makes me able to think differently about the industry and ultimately allow me to be disruptive.

This small thread has already yielded some good connections.

Cheers


User currently offlineTWA772LR From United States of America, joined Nov 2011, 1145 posts, RR: 1
Reply 12, posted (1 year 7 months 2 weeks 6 days 7 hours ago) and read 4617 times:

I'm not a pilot but I know some pilots and my mom used to work with them and keeps in contact with some, so here is my shot.
Max Pilot hours:
8 flight hrs/day
100 hrs/month
16 hr "duty day" which means working (sitting at airport, route planning, etc...) but not sure if includes flight time.
24 hr rest (75% sure) but I don't know when pilots take those

The ratio is one FA to 50 pax, so if you want just 2 FA's, it sounds like you should go with an EJet or CRJ-700 or a 735 or 736 or A318. Depending on the routes you would like to fly, I'm sure there are some cheap, older ATR 72's lying around somewhere

Keep in mind I am only 19 years old and this is all just off the top of my head. I would also like any input and/or corrections to my info from anyone who would know more and have a better understanding of this stuff than I do. I just like to learn  . I also want to start my own airline, or run a current one, someday so I am having this thread starred.



Я говорю по-русский. :)
User currently offlinemandala499 From Indonesia, joined Aug 2001, 6590 posts, RR: 75
Reply 13, posted (1 year 7 months 2 weeks 6 days 4 hours ago) and read 4588 times:

Quoting TWA772LR (Reply 12):
8 flight hrs/day
100 hrs/month
16 hr "duty day" which means working (sitting at airport, route planning, etc...) but not sure if includes flight time.
24 hr rest (75% sure) but I don't know when pilots take those

You should have a look at FAR121... it covers these things.

The 16hr duty day is for FAs, that includes the flying.
For pilots I think it's 12hr duty day, includes max 9 hrs of flying.
24hr rest is mandatory at least 1x in every 7 day period... that is 24hr rest free from working / office duty for the airline.
Don't forget there's also a 7 day flight hour limit, and an annual one for pilots. (FAs only got duty limits).

Mandala499



When losing situational awareness, pray Cumulus Granitus isn't nearby !
User currently offlineTWA772LR From United States of America, joined Nov 2011, 1145 posts, RR: 1
Reply 14, posted (1 year 7 months 2 weeks 6 days 4 hours ago) and read 4572 times:

Quoting mandala499 (Reply 13):

Thanks mandala!



Я говорю по-русский. :)
User currently offlinezkojq From New Zealand, joined Sep 2011, 1059 posts, RR: 1
Reply 15, posted (1 year 7 months 2 weeks 3 days 21 hours ago) and read 4337 times:

Startup-Boeing has a lot of handy resources.
Have a look here: http://www.boeing.com/commercial/startup/

Good Luck



repaint ZK-PBG!
User currently offlinebueb0g From United Kingdom, joined Jul 2010, 623 posts, RR: 0
Reply 16, posted (1 year 7 months 2 weeks 3 days 7 hours ago) and read 4277 times:

Quoting JSpos (Thread starter):
I would like to plan around a single airframe

Not sure how it is with the FAA, but many authorities that I know require at least 2 aircraft to issue an air operating certificate.

Quoting JSpos (Thread starter):
Right now I'm figuring 2 pilots, 2 attendants,

For one plane, you'll likely need 10 pilots. If you want to go long haul, the rule of thumb (at least over here) is 10 Captains and 15 FO's.



Roger roger, what's our vector, victor?
User currently offlineXJetflyer From United States of America, joined Apr 2007, 326 posts, RR: 0
Reply 17, posted (1 year 7 months 2 weeks 3 days 5 hours ago) and read 4254 times:

So can a person have two Embraer ERJ145's and start an airline? I know a lot of airlines and people on here say 50 seat aircraft make no sense, but if you had the right markets and really worked hard I can see it being a good thing.

I think start up cost and and a solid advertisement fund is where most companies lose out fast. Years ago I did have a group ask me to join them as an investor in a startup airline. After careful thinking and reviewing, I decided against it. The company never happened.

I would not mind starting a small cargo plane company. I would think the profit is better in cargo, I may be wrong.


User currently offlineFabo From Slovakia, joined Aug 2005, 1211 posts, RR: 1
Reply 18, posted (1 year 7 months 2 weeks 2 days 13 hours ago) and read 4188 times:

Quoting XJetflyer (Reply 17):
So can a person have two Embraer ERJ145's and start an airline?

Technicaly... yes.

Quoting XJetflyer (Reply 17):
I know a lot of airlines and people on here say 50 seat aircraft make no sense, but if you had the right markets and really worked hard I can see it being a good thing.

The right markets... Problem is, are there any? The RJs heyday was when fuel was cheap and time was not. Nowadays, it makes more sense to use a turboprop. An ATR will use much less fuel on the same route than ERJ, time difference is not always enormous, and although comfort (mainly noise) is better in a jet, not much people will pay the extra.
It can work though, provided you find those 50 people...

Quoting XJetflyer (Reply 17):
I would not mind starting a small cargo plane company. I would think the profit is better in cargo, I may be wrong.

I dunno. It is said that airlines make big money of airfreight, but the catch is, if you want to send cargo with Delta, or Atlas, they have a network...

Charter cargo is all about getting the job, if you can do that, then yes, it can work.



The light at the end of tunnel turn out to be a lighted sing saying NO EXIT
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