While some might say that launching a new airline in the middle of a pandemic is crazy person territory, there’s no doubt that there’s a small segment of entrepreneurs that don’t subscribe to that school of thought. New airlines are announcing launches with surprising regularity, but what makes these businesses think they can succeed where so many others are struggling?
Speaking at today’s Future Travel Experience/APEX Virtual Expo, four of the industry’s ambitious startup airline CEOs got together to discuss just this. Nino (Navdip) Singh Judge, CEO of flypop, Matteo Bonecchi, CEO of Ego Airways, Birgir Jonsson, CEO of PLAY and Olivier Arrindell, CEO of Ava Airways, explained how they believe they are not only in a good position to succeed, but are actually entering the market with a competitive advantage over their peers.
Arriving on the battlefield fresh
A mark of the pandemic has been the high levels of debt accrued by legacy airlines. While support from governments and financial institutions has inevitably prevented bankruptcies, it has left aviation with a bloated level of debt. IATA estimates the industry now owes some $651 billion, up $220 billion in the last year alone.
The airline startups believe this fact puts them at a competitive advantage. Nino Judge, flypop’s CEO, is looking to connect secondary cities in the UK with similar locations in India. He likened it to arriving at a battle fresh, while the enemy was tired and worn. He said,
“It’s in these crises you always have opportunities. And I think the opportunity there is to start afresh. Can you imagine going into battle – and let’s be honest, aviation is a war – imagine going in with fresh troops and the best equipment all while undercutting your opposition, who have travelled for a year and a half, incurring losses, all the way to your battlefield.
“It’s just never been done before. So that’s what we’re doing; we’re getting to the battleground with fresh feet.”
Not only are these startups arriving in the market unencumbered and without the world-weary outlook of their legacy compatriots, but they are also able to access unprecedented levels of industry talent. Not only that, but the markets have changed, and because these airlines are not contending with pre-COVID arrangements, they have a fresh opportunity to make their business fit the current environment.
Matteo Bonecchi, CEO of Ego Airways, commented that,
“There is no shortage of pilots or flight attendants or people in the industry, and that is a help.”
Ego plans to fly domestically in Italy. Because of this operating model, it is not going to be constrained by border restrictions or the other challenges of international travel. Bonnecchi noted that conversely from what other airlines are experiencing, the domestic Italian market is actually bigger now than it was when his airline was conceived. He said,
“What before was a niche, now is a market to enter and to explore.”
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Starting from scratch
As well as entering the market with less baggage than their competitors, these airline startups are in the enviable position of being able to create the perfect airline for right now. Instead of competing like-for-like with legacy carriers, these new carriers are able to build something that fits the bill from the ground up. Birgir Jonsson, CEO of PLAY, noted,
“You can treat COVID as a curse and you can also treat it as a blessing. It’s a kind of half-time, and a great opportunity to enter the game. And you can enter the game with a new setup and a new approach.”
That new approach goes from the routes and aircraft being chosen right through to the backend systems that are powering these carriers. Technology adoption can be a slow and arduous process for older airlines; these young startups have the opportunity to approach the market with a digital-first attitude, as Bonnechi explained,
“Starting from scratch, from zero, allows you to choose the best solution. You don’t have to make an adjustment with your internal organization … you can choose the best investment in terms of technology versus people, so that you are reaching the goal of the company.”
Not only do these airlines have the opportunity to integrate the most modern systems and processes from the start, they also have more cash to spend on these investments. Incredible deals on everything from leased aircraft to software packages, the money the startups have to hand is stretching much further than anticipated. Judge said,
“With the reduced costs for the big-ticket items like aircraft, crew, etc., there’s a huge discount right now. So that really helps to us to spend money on the technology side.”
Making the right decisions, at the right times
Although COVID has presented a huge opportunity for new airlines, Jonsson noted that it’s important to approach it as a temporary advantage. While legacy airlines are left struggling with the wrong people, the wrong technologies, and huge cash burn, eventually, these startups – if all goes well – will build a legacy of their own. As such, it’s crucial to make the best choices now. Jonsson said,
“It is so important to use the time and take decisions strategically, so you’re not making the wrong moves.”
While Bonnechi’s Ego Airways will launch in just a few weeks, thanks to its domestic network and PLAY will inaugurate service in June, the other startups are taking their time. Olivier Arrindell noted that, for Ava Airways, it was important to ensure its destinations were fully open before beginning service. He said,
“When you have your personal money and monies of your friends and athletes and actors that are together with you, you have to be very cautious to take calculated risk when it comes to that. Fact. So what we are waiting for is 90% of the jurisdictions where we are going to be flying … to properly open. We’re waiting on everybody to get over this vaccinating session, and then we’re gonna take off running.”
Judge plans to launch FlyPop in the fall, but also said that he doesn’t mind pushing back the start date if the environment is not right. Thanks to the low cash burn at his fledgling business, he says there’s no reason to rush into starting service until the time is right. He said,
“We’re sticking to the first of October because we believe things should be sorted out by then … We are in the tremendous position of having the minimum amount of cash burn. We can afford to wait until the timing is right. We haven’t got fleets sitting on the ground, and huge amounts of debt piling up.
“So one of the biggest weapons that we have … is the element of surprise. We can hit the market when we feel the timing is right. So if I have to delay from October to January, it’s the minimum amount of cash burn … the most important decision we’re going to make is to fly when we can fill those planes.”
What do you make of these airline startups; do you think they have a competitive advantage? Let us know in the comments.