Starting An Airline
FAA Regulations Are Demanding, But Possible
Mr. McGee, the author of an article entitled “So you want to start an airline?”, lays out an interesting thesis that the airline industry has not experienced much entry (none since 2000) due to Financial, Competitive and Operational obstacles. For two of his three categories, his case is well labeled and well supported. But his term “operational” does not fit well with the analysis presented under this heading. His discussion under that category really involves an opinion as to adequate financing.
The general thesis that entry is blocked by regulatory hurdles is a bit overstated. Unless the author believes the rule that the US DoT requires sound capitalization is somehow complicit with Wall Street’s reluctance to finance new air ventures (not sure how a responsible consumer protection review could do less), the link is not proved.
The US Department of Transportation inherited what remained of the CAB’s review of applicants seeking an air carrier certificate. There may have been a time when its assessment was cursory, but after the 1996 Value Jet crash, the scrutiny of review intensified. Today, the DoT’s Air Carrier Fitness Division has established specific criteria and made the process exceptionally transparent. It’s not paint-by-numbers (the required data needs explanation and advocacy), but good explanations are contained in two well-written documents:
- 9 page FAQ website
The DoT does carefully research all of the information provided and even an inadvertent error can raise the hackles of the Fitness staff. Rarely does an applicant file an application with more capital than needed or with a marketing plan which is rock solid or all of the aircraft/personnel in place; so, a capable advocate is a worthwhile expense.
The FAA must examine a lot of very specific criteria, in large part driven by the fact that airlines, particularly new ones, must present a cohesive set of operational, maintenance, training, dispatch, emergency and related manuals/procedures/practices/paperwork. Each of those elements must relate to the applicants’ specific aircraft, cities & routes & structure, pilots (experience/training), maintenance (facilities, equipment, record-keeping system), management and emergency plans. This is not a fill-in-the-blank requirement, but involves thoughtful establishment of a clear, technically sound and systematic regime. Further, a new airline must create a precise SMS program, which is hard to write without prior similar experience and which is even more difficult to implement ab initio.
Since the FAA FAR Part 121 requirements are not intuitive, a cadre of Qualified Consultants was established and an explanation of how the relationship between the applicant and the QC is supposed to work:
A QC is expected to help new operators achieve their formal application in the most timely and cost-effective manner.
The DoT economic fitness is not an easy evaluation, but their “packet” and FAQ are there to help. Similarly, the FAA Part 121 review is exacting; so it created the Qualified Consultant Program to help a carrier through this process.
The Regulatory Processes are demanding, but it is inaccurate to characterize them as “obstacles.”
If an airline is a business goal, follow the CONTOURS rule, “First I look at the Purse.” If you have the capital, there is a way to your goal.