How to set up an airline?

Hi there! It seems you are looking to set up a budget airline. Well, you are at the right place. Here I will give you all the preliminary information on setting up a budget airline in India (Well it is more or less the same elsewhere too, except the names of the government agencies and some procedures with respect to the country). Have a look.

        Have you ever wondered what it would be like to set up and own an airline of your own? Probably not. We are still focused on how better we can fly. From economy class to super economy or economy plus, economy plus to business, business class to first-class air travel and finally to luxury travel. All through your 9 am to 5 pm life you have only dreamed about flying in a better class next time. For one minute think what would it be like to be an owner of an airline and fly your luxurious jet. Seems too ambitious, isn’t it? On the contrary, it isn’t. Yes, it is damn well within your limits. Let us see what we need at the beginning to set up an airline. 

Huge Capital: Yes, you guessed it right. To set up an airline you need a huge capital but that depends on the type of air operation and aircraft that you intend to operate. You can start by leasing an aircraft at the beginning. In India, the Ministry of Civil Aviation has devised and brought in force two schemes namely RCS (Regional Connectivity Scheme) and UDAN (Ade Desh ka Aam Nagrik) to boost air travel in the country. Leasing a conventional wide-bodied jet aircraft like Airbus A320 or the Boeing 737 will cost a huge amount of investment (like in hundreds of crores) but leasing a turboprop aircraft with a minimum seating capacity of 19 or more will cost you just in tens of crores. For example, the Hindustan Aeronautics Limited (HAL) has offered the commercial market players to lease the Dornier 228 aircraft which is a twin-turboprop aircraft with a seating capacity of 19. To start off with, one can lease such smaller aircraft and operate between shorter routes and start building the airline into a reputed and sought after one. The capital investment is not just for the leasing of aircraft but also for other important aspects such as Maintenance, Repair and Overhauls (MRO) of the leased aircraft, payment of landing and parking charges to the Airports Authority of India (AAI), Aviation Turbine Fuel or AVGAS, ground handling charges and salary of your employees.  

A registered Company and Air Operator Permit: To become an airline operator you first need a registered company under the Companies Act 2013. It can be a Private Limited Company, an LLP or even a One Person Company (if your too rich and do not need investment from a partner). Once the company is incorporated along with the other necessary certificates/ documents such as GSTIN, PAN etc., you must an Air Operator Permit/ Certificate (AOP/C) from Directorate General of Civil Aviation (DGCA). To obtain the same you must first decide upon the aircraft that you are planning to lease and the aircraft finalised should have necessary certification such as the Air Worthiness Certificate etc. This will generally be ensured by an aircraft leasing company who would already have all the requisite documents for an aircraft to operate. While applying for the AOP to DGCA, an MoU between you and the aircraft leasing company will have to be submitted along with the other documents. DGCA will then scrutinize your application and inspect the aircraft that is planned to be leased and if found legally correct you will be awarded an Air Operator Permit which is mandatory to operate aircraft in the country. One must note that AOP is applied based on the nature of operation you are planning to induct the aircraft for. They are:-

1. Scheduled operations – this operation is what you should be opting for since you are setting up an airline which will be having a schedule of operations on the routes you intend to operate irrespective of whether all the available seats are booked or not.

2. Non- Scheduled operations – this is in general opted for operating as a charter or for a private party wherein the operations are not scheduled but undertaken on a required basis and when it is anticipated that all the seats will be booked for.

3. General aviation – operations in which the aircraft is hired for VVIP/ political/ state-related commitments where it is operated on the request of a person, a company or an entity (private or govt) and the charges for the same differ (maybe higher) from the above-mentioned types.

Having understood the type of operations let us just stick to Scheduled air operations as the goal of the company is to be an airline and not an air service provider. Once the AOP is obtained you are cleared to operate in the country as a scheduled air operator.

Route Clearance: Now comes the important part of setting up, the route you intend to operate. To kick start as a scheduled operator you have to select a particular route to operate on. Depending on the type of aircraft you have obtained the AOP for the route needs to be decided (you do not want your passengers to fly for hours if your aircraft is smaller because that would make them uncomfortable and you will not gain market). Hence depending upon the type, range and sophistication of the aircraft you obtained the clearance for you must decide the route. Once you have decided the route you will have to apply for route clearance to DGCA and AAI. AAI will clear the time slot available for that particular airport and DGCA will provide you clearance for operations between the airports. At present, a total of 1000 air routes have been planned to be made operational under the UDAN scheme, specifically between shorter distance to boost air travel in the country. A comprehensive bidding process is carried out by AAI and DGCA from time to time for the same and the route is awarded to the highest bidder. You can be one of them and yes your huge capital that we discussed earlier will come in handy here too. 

Necessary Manpower: After obtaining the AOP and route clearance you need to position the adequate number of manpower at the airports for which clearance has been obtained. This trained manpower will be carrying out duties such as ground handling (aircraft receiving, marshalling, parking, unloading and loading of baggage/ cargo, deboarding/ boarding of passengers, fuelling/ refuelling, turn around cleaning of the cabin etc), checking in of passengers, baggage screening, movement of baggage from the terminal to the aircraft etc. Additionally, manpower also includes your aircrew who fly the aircraft and cabin crew who handle the in-flight services for the passengers. This also forms part of your investment at the beginning as the hiring of manpower. Hence, when you prepare the project proposal all these are to be considered to arrive at the figure of the total investment required. Again, the capital required to be invested will depend upon the type of aircraft, the number of airports you intend to operate from, hiring of manpower as discussed above and other miscellaneous charges such as marketing etc.

Well, I hope that answers your search and has given you some information on setting up an airline. If you wish to know more about this feel free to drop a mail through our contact forum. We will be happy to help you.

Your friend

Vijay Vignesh

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