UK: Key Considerations For Airline Start-Ups

Starting an airline requires entrepreneurs with drive, motivation and vision to turn the idea into a viable reality. It is vital to seek out the right specialist expertise at the earliest stages to get things established on the right footing.

The Ince & Co Aviation Team has advised clients on all matters relating to aviation start-ups, from aircraft financing, leasing and engine agreements through to regulatory issues, corporate structures and shareholding arrangements, and the resolution of disputes when required.

As well as specialist aviation knowledge, we have the core capabilities to advise you on commercial agreements, corporate structure, employment issues, intellectual property, insurance and real estate. With our team's numerous years of experience (much of which is in the airline industry), we have a deep understanding of the operational, technical and commercial demands of the airline business and the particular issues facing start-ups. Our familiarity with aircraft manufacturers such as Boeing, Airbus and Bombardier, lessors and financiers along with their contract forms and procedures will help you to acquire and finance aircraft on the best commercial and operating terms for your business needs.

If you are intending to establish an airline, the areas outlined below should be carefully considered.

Initial Planning

  • Market research including routes and the creation of a robust business plan for the airline.
  • Choice of jurisdiction and location for the operating base (and, if different, head office and aircraft owning/leasing vehicles) driven by various factors including:
    • market analysis of the appropriate operating hub;
    • ability to meet nationality or other requirements to qualify to operate routes under bilateral or multilateral open skies agreements (EU, EU-US, ASEAN);
    • relationship with and understanding of the requirements of the relevant civil aviation authority or equivalent;
    • relationship with and understanding of the likely attitude of the transport ministry/other government authorities (for example, will they support the creation of a competitor to a national flag carrier and will that support will flow through to state entities that approve licences, planning permissions, work visas and so on?);
    • tax considerations;
    • "bankability" of the jurisdiction and the security registration structure for financiers;
    • availability and cost of appropriate staff and suppliers; and
    • public relations/marketing presentation.
  • The acquisition or formation of a company to operate the airline (and if appropriate/required to hold aircraft and/or employ staff in different jurisdictions).
  • Implementation of advertising and promotional arrangements to alert the market to the launch of operations as a passenger or cargo carrier or both.
  • Organisation in advance of distribution and sales (including facilities for telephone and on-line sales of product and merchant acquirer or other arrangements with credit card and payment processing providers).
  • Completion of financial and tax planning to facilitate commencement of operations, for example working capital requirements, aircraft finance requirements, cash flow projections and revenue budgets.
  • Attracting and agreeing terms of investment, capital base and off-balance sheet financing, for example private equity, IPO, and other possible forms of financing.
  • Arrangement of payment procedures for transit charges with air navigation authorities.
  • Arrangement of reporting, credit acquisition and payment procedures for the EU Emissions Trading Scheme if the airline will operate in or into the EU.

Rights and Licences

  • The acquisition of all necessary licences, consents, permits, declarations, filings, registrations, approvals and certificates (including the Air Operator's Certificate) to possess, operate and maintain aircraft in passenger-carrying, revenue-earning service.
  • Ensure a designated carrier under relevant bilateral/ multilateral air transport agreements.

Acquisition of Assets and Rights

  • The acquisition of the right routes, operating rights and landing/take-off slots.
  • Agreements with relevant airports (including agreement of per pax charges and location of facilities within airport) and/or service providers for provision of check-in and sales desks, passenger and baggage handling, lounge access, catering, cleaning, aircraft stands, hangar use/access, fuel supply and other required facilities.
  • The acquisition of the right aircraft, ready to launch operations on schedule; agreeing operating leases (the most likely arrangement for a start-up airline) or making arrangements to operate initially as a "virtual" airline (having an existing airline with an AOC and aircraft operate under your brand).
  • The employment of sufficient flight and cabin crew, support and administrative employees to launch operations on time and obtain all necessary work permits and security clearances for them.
  • The acquisition of the required hull, liability and war risk and other insurance coverage in time for the commencement of operations.
  • Agreement of planned maintenance programmes with all manufacturers and suppliers of major equipment and components and putting in place MRO agreements as required with external maintenance providers.
  • The acquisition and fit-out of base premises and offices and maintenance facilities.
  • Putting in place commission and other arrangements in relation to anticipated ancillary revenue streams (for example arrangements with hotels, car hire, airport parking and coach/bus/train transfers).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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