Scheduled airline start-up models – the Low Cost Carrier model is the favourite choice
1st July 2021
As the collapse in demand for air travel has caused market gaps coupled with the availability of aircraft and personnel, we are seeing a significant surge in airline start-ups globally. As is always the case, some are paper airlines that will not actually launch and many that do launch will probably be destined to fail. In this analysis, we look to see what trends there are in the business models being adopted.
The pandemic has created unimagined disruption for airlines around the world, with international border closures and individual country lockdowns also limiting domestic travel.
The drivers of new entry are:
Market opportunities
The failure, restructuring or shrinking of incumbent airlines is creating gaps in the market which new entrants are seeking to exploit as and when travel resumes. From the tables below it can be seen that this is applicable in certain South American countries, Norway, South Africa and Italy where there have been either airline failures of capacity reduction as a result of restructuring.
Balance Sheets
An attraction for investors is that new entrants may be able to gain a financial advantage over incumbents, whose balance sheets are now burdened with debt taken on to sustain liquidity through the pandemic. For example, Norwegian’s business plan has the airline having $20m of debt per aircraft.
Aircraft cost and availability
Pre-pandemic aircraft were in short supply and start-ups were unable to match the cost of ownership achieved by the large LCCs such as easyJet, Ryanair and Wizz in Europe. Lease rates have seen substantial falls across most types and lessors have immediate availability.
Availability of personnel
Aircraft and experienced airline staff, both of which were scarce resources prior to the pandemic, are now widely and inexpensively available.
Suppliers
Many members of the supply chain such as airports, ground handlers, caterers and maintenance providers have all been adversely impacted by lower volumes and will be open to providing attractive commercial deals.
The tables below shows the list of 36 start-ups by region.
Europe start-up airlines
| Airline | Country | Business model | Fleet type | Comment |
| Norse Atlantic | Norway | Long-haul LCC | B787 | Norwegian backfill |
| Air Montenegro | Montenegro | Full service | E-195 | |
| Andorra Airlines | Andorra | Regional | ATR72-500 | |
| HiSky | Moldova | Short-haul LCC | A319 and A320 | |
| Flyr | Norway | Short-haul LCC | B737-800 | Norwegian backfill |
| PLAY | Iceland | Long-haul LCC connector | A321 | WOW backfill |
| Ego Airways | Italy | Domestic regional | E190 | Air Italy and Alitalia backfill |
| Sky Alps | Italy | Domestic regional | Q400 | New markets from Bolzano |
| Bees | Ukraine | Short-haul LCC | B737-800 | Initially operating charter flights |
| flyPop | UK | Long-haul LCC | A330 | Serving UK-India |
| Latitude Hub | Spain | Short-haul LCC | A319 | Partly funded by local government and hoteliers |
| Uep Airways | Spain | Regional | ATR72 | Connecting the Balearic islands |
| Flylili | Romania | TBA | A320 |
Asia start-up airlines
| Airline | Country | Business model | Fleet type | Comment |
| Vietravel | Vietnam | Short-haul LCC | A321 | Domestic and regional |
| Flybig | India | Regional | ATR and Q400 | Based in Indore |
| Greater Bay | Hong Kong | Short-haul LCC | B737-800 | Cathay Dragon backfill |
| AeroK | Korea | Short-haul LCC | A320 | Domestic and regional |
| Super Air Jet | Indonesia | Short-haul LCC | A320 | Links to Lion Air Group |
| OTT Airlines | China | Regional | C919 | China Eastern subsidiary |
| Air Sial | Pakistan | Short-haul LCC | A320 | Domestic |
North America – start-up airlines
| Airline | Country | Business model | Fleet type | Comment |
| Avelo | USA | Short-haul ULCC | B737-800 | Point-to-point on unserved markets |
| Breeze | USA | Short-haul LCC | ERJ and A220 | Point to point, secondary cities |
| Ita | Brazil | Full service | A320 | Latam backfill |
| Nella | Brazil | Regional | ATR-42 | Latam backfill |
| Ecuatoriana | Ecuador | Domestic regional | TBA | Latam backfill |
| Avoris | Dominican Republic | TBA | TBA | |
| JetSmart Peru | Peru | Short-haul LCC | A320 | Backed by Indigo Partners |
Middle East and Africa start-up airlines
| Airline | Country | Business model | Fleet type | Comment |
| LIFT | South Africa | Domestic LCC | A320 | SAA backfill |
| Burundi Airlines | Burundi | Flag carrier | TBA | |
| Ghana Airlines | Ghana | Flag carrier | TBA | |
| Wizz Abu Dhabi | Abu Dhabi | Short-haul LCC | A321NEO | |
| Air Arabia Abu Dhabi | Abu Dhabi | Short-haul LCC | A320 | |
| Royal Zambian Airlines | Zambia | Regional | Emb-120 and Emb-145 | |
| Lone Star Air | Liberia | Full service | ||
| New Saudi airline | Saudi Arabia | Full service | TBA | Backed by sovereign wealth fund |
Oceania start-up airlines
| Airline | Country | Business model | Fleet type | Comment |
| Pacifika | New Zealand | Short-haul LCC | B737-800 | Leisure routes to Cook Islands |
Because many markets have shrunk in size, and may take a number of years to recover, the aircraft operated by many large airlines may now be too large for many routes. On short-haul routes the “standard” aircraft are either B737-800s of A320’s.
Where these large aircraft are too large this leaves a potential gap for airlines operating smaller aircraft that are better suited to current and future market sizes. That said, if demand does recover to previous levels this “opportunity” may be relatively short lived.
Most airline business models are represented by these start-up airlines, even unfashionable models such as long-haul low cost. Short-haul LCCs are perhaps best represented which is understandable given most forecasters belief that leisure recovers quicker than business and short-haul will recover quicker than long-haul.
Author: Tim Coombs
