Aerospace Aerospace Entrepreneurship & Entrepreneurship & The Complexities of The Complexities of Starting a New Regional Starting a New Regional Airline Airline Presented by: Ben Jurewicz April 21, 2005 “ “ The lessons Learned in Starting A Regional The lessons Learned in Starting A Regional Airline Airline in San Antonio, Texas” in San Antonio, Texas” MIT Engineering Systems Division Leadership Seminar April 21,2005
36
Embed
Aerospace Entrepreneurship & The Complexities of Starting a New Regional Airline Aerospace Entrepreneurship & The Complexities of Starting a New Regional.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Aerospace Entrepreneurship &Aerospace Entrepreneurship &The Complexities of Starting a The Complexities of Starting a
New Regional AirlineNew Regional Airline
Presented by:
Ben Jurewicz
April 21, 2005
““The lessons Learned in Starting A Regional Airline The lessons Learned in Starting A Regional Airline in San Antonio, Texas”in San Antonio, Texas”
MIT Engineering Systems Division Leadership Seminar April 21,2005
2
AgendaAgenda
• Starting an Airline Company
• Organizing a Seed Investor Group
• Creating A Business Plan
• Building A Management Team
• The Great Plains Airline Saga
• Raising the Money
• Aerospace Entrepreneurship
3
Architect
Engineer
Builder
Customer
User
Entrepreneurial Engineering
4
Starting A New CompanyStarting A New CompanyPerception
Idea Business Plan Start Up Growth
Reality
Idea
Business Plan
Start UpGrowth
$$$$$
5
Regional AirlinesRegional Airlines
• Fly Shorter Distances with Smaller PlanesTypically Less Than 1000 MilesLess Than 100 Seat AirplanesNormally, Centered About A Destination City
• Highest Growth Segment in Airline Business7% Ave. Annual Passenger Growth113 Million Pass. In 2003
• Regional Airlines Are ProfitableLegacy Airlines Losing MoneyLow Cost Nationals Are ProfitableRegional Airlines are More Profitable
6
San Antonio Market San Antonio Market
• A Major U. S. Destination City 20 Million Visitors/Yr & Growing at 6%/Yr 75% from TX and Neighboring States
• Automobile Travel Dominates Only 10% of Visitors by Air Limited Regional Non Stop Air Service
• Significant Potential With Mexican Cities Inconvenient Travel Through Dallas/Houston Limited Service to Mexican Cities
• San Antonio Not In Top 50 Regional Airports Note: Based on 5 Independent Current Marketing Studies
7
Seven “Seed” InvestorsSeven “Seed” Investors
• Ex-VP American Airlines
• America West Pilot
• Mature Aerospace Executive
• Mexican Businessman
• Medical Doctor
• IT Executive
• CEO & Financial Background
8
Creating a Business PlanCreating a Business Plan
• Define the Market
• Select the Airplane
• Define the Operations
• Find the Key People
• Run the Numbers
9
Initial Route StructureInitial Route Structure
10
Targeted MarketTargeted Market
City Miles Annual Trips
New Orleans, LA 520 95,260Albuquerque, NM 625 68,780OK City, OK 425 64,470Tulsa, OK 490 53,070Little Rock, AR 520 47,420Colorado Springs, CO 745 32,640Lubbock 350 31,450Amarillo 450 31,370Birmingham, AL 747 29,150Jackson, MI 545 20,444Midland/Odessa 280 17,920Sub Total 491,974
Conclusion: With 93 Pass./Day/City and Probably Less Than Half on Any One Trip (Say 30 Pass./Trip), a 25 Seat Plane is A little Too Small, A 100 Seat Plane Is a little Too Big, But A 50 Seat Plane Is Just About Right.
12
Baseline AircraftBaseline Aircraft
A 50 Pass. Seat Jet ~ 98 Ft. Long ~ 66 Ft. Wingspan Max cruise Speed – or 450 kts Two Rolls-Royce AE 3007A1
Engines @ 7580 lbs Thrust Range > 1000Mi. Service Ceiling at 37,000 Ft.
Embraer 145 Regional Jet
13
Alternative AircraftAlternative Aircraft
A 32 Pass. Seat Jet ~ 70 Ft. Long ~ 69 Ft. Wingspan Max Cruise Speed @ 400 kts Two Pratt & Whitney
PW 306 B Engines @ 6050 lbs Thrust Range > 1000Mi. Service Ceiling at 31,000 Ft.
Avcraft Dornier 328Jet
14
Business StrategyBusiness Strategy
• Provide Point-To-Point, Low Fare, Non-Stop, No-Frills Jet Service.
• Market “Destination San Antonio” to City, CVB And Local Businesses.
• Operate With A Single Airframe Type To Minimize Costs and Increase Productivity.
• Outsource Wherever Possible to Minimize Asset Acquisition Costs.
• Use Technology To Control Costs and Satisfy Customer Needs.
15
CompetitionCompetition• No Regional Non-Stop Airline Servicing
San Antonio.• Major Airlines Provide Service With
Intermediate Stops.• Competitors Heavily Engaged in Cost
Reduction And Price Competition.• Southwest Air Fares Represent Upper
Limit on Prices.• Possible Support from Major Airlines.
16
Operational ApproachOperational Approach
• Demand Driven Business Model Revenue Based With Costs To Support Competitive, Performance-Based Salaries Outsource Selected Functions
• Simple Operational Approach Single Aircraft Type Streamlined Fare Structure Reservations Via Web
• Win the Hearts of San Antonio Travelers Customer-Focused Marketing Low Fares All the time Conveniently Scheduled Service Amenities for a Trip Pleasant
17
0
50
100
150
200
250
300
0 200 400 600 800 1000 1200
Trip Distance - Miles
Refundable Anytime Fares - $
Budget Fare $50+$0.10 X Miles
High End Fare$50+$0.15 X Miles
Pricing StructurePricing Structure(Compared to Southwest Airlines One-Way Fares To/From San (Compared to Southwest Airlines One-Way Fares To/From San
Antonio,TX, Indicated by the Symbols) Antonio,TX, Indicated by the Symbols)
• Lease Deposit for Airplanes• Procure Initial Inventories• Set Up, & Checkout Airplane Functions• Set Up & Checkout Airport Operations • Implement Maintenance Plan• Provide Initial Airport Contract Fee Deposits• Recruit & Train Start Up Full Staff• Final Checkout of Operational Systems• Extensive Advertising & Promotion• Misc. Operational Start Up Fees (fuel, tools, etc.)• Misc. Admin. Start Up fees (computers, supplies, etc.)• Full Staff Start Up Salaries, Moving, &Training Costs• Negative Operational Cash flow for First 4-5 Months
Note: Cost to Cover Above Estimated at $7M
MAJOR TASKS:
31
Investor’s WorldInvestor’s World
• Must Be Interested in Specific Business Area• Typically, Won’t Read A Business Plan• Different Types at Different Levels
– Friends & Family– Angels & Angel Groups– Very Wealthy Individuals– Professional Venture Capitalists– Corporate Venture Groups– Public Entity Investors– Public At Large
ACEFunction Is to Do Aerospace Entrepreneurial Engineering
Note: (1) Prefer to Be Associated with Academic Center (2) Includes Virtual Meetings Based on Numedeon Technology (3) Conceived As a Self-Sustaining, Non-Profit Organization
35
Service Individuals Start-Ups Corporations Financers Agencies
Knowledge X X XConsultation X X XResearch X X X XPersonnel X XFinancing X