The Business of Aviation

With the old saying "it takes money to make money" becomes very true in the aviation industry. Everything in the industry cost money and lots of money. Starting with even buying one commercial aircraft this will cost millions of dollars, painting the aircraft to your companies exact specifications, fueling the aircraft, and even configuring the interior to the way it will fit the companies needs. From a consumer standpoint the flying is considered a "luxury". Sure it might not be the most practical method of transportation but for some saving even $50 over the course of the trip could mean the world to that particular consumer. From a CNN Money article it states " with a net profit margin of just 2.4%, airlines only retain $5.42 per passenger carried" and believe it or not that number has increased from only $2.05 per passenger from two years ago. Although the profits that airlines generate are usually due to cost-cutting in the industry through improved efficiency and consolidation. I am a firm believer in the saying "time is money" and I would say that spending more money to fly to a destination vs driving is a more practical idea. Year after year consumers complain about the costs associated with flying with a commercial airline saying its too expensive or its a rip off that an airline charges $20 to check a bag. Also, the common perception to the public is that airlines must be rolling in money for how much they charge but in reality its the common everyday products that consumers buy like a 20oz Coke from the gas station or even a pizza for dinner these two items have a high profit margin than an airline but the consumer doesn't complain about that at all.

One start-up airline that has been successful and has a good business plan is Surfair. The airline travels between Burbank, San Carlos, Santa Barbara, Hawthorne, and Lake Tahoe. Surfair flies up to 28 daily departures. They offer quick booking that they claim only takes 30 seconds to do and consider themselves to be "first class service" by offering no lines and no hassle commuting. Something that is rather catchy with this particular airline is that they are the first-in-the-industry "all you can fly" membership plan. The plan allows a passenger to pay monthly for the membership and it has helped the airline pick up 800 members in a little more than a year of existence. Members can book up to four flights at a time and once the four flights are over the member can then book another four flights. A senior executive in Memberships and Marketing describes this plan as the "Netflix" model. By offering a service that is exclusive to your company will provide brand acknowledgement and start making the company money. The membership plans start out at $1,750 per month and corporate and family plans are also available. Even though Surfair only has destinations on the west coast this is a great idea and something larger airlines should look into.

References

 http://www.investopedia.com/financial-edge/0510/4-reasons-why-airlines-are-always-struggling.aspx

http://www.benzinga.com/analyst-ratings/analyst-color/14/07/4737471/2-innovative-airline-startups

http://www.surfair.com/how-it-works.html

http://www.cnn.com/2014/06/03/travel/how-airlines-make-less-than-6/