Idea Analysis Blog 1: Helios Air

Helios Air will be the world’s first low-cost civilian helicopter airline, serving short-haul travel routes that are currently unprofitable for regular fixed-wing airlines to operate.

The traditional “hub and spoke” model in the airline industry has proven itself to be the most cost-effective strategy for regular fixed-wing airlines, allowing them to reach and connect small towns worldwide. However, in recent years, these airlines have found many of the smaller “spokes” increasingly unprofitable, and have either raised ticket prices for the common passenger or ditched these routes altogether. Helios will regain these less-traveled routes by utilizing full-service helicopters, which have a lower capacity than fixed-wing aircraft. For the passenger who needs to fly on these routes, Helios Air will provide a service that costs less than a regular airline but is also faster than alternative modes of transportation, such as rail.

An example of a target route for Helios would be between two Indian cities, Pune and Mumbai. Only one airline, Jet Airways, operates flights on this sector, in order to connect passengers to westbound flights from Mumbai. The airline operates the 55-minute journey using a Boeing 737-800 with a passenger capacity of 189. The flight is usually under-capacity, except for a few businesspeople who need to connect to/from international flights. The majority of passengers – middle-class Indians who live in Pune but travel to Mumbai for work/family reasons – choose to travel by train, which takes 2 hours but costs substantially less than the Rs.6000/$96 charged by Jet Airways. Accordingly, even low-cost Indian airlines such as SpiceJet and IndiGo have refused to fly this sector. Helios would ideally be able to use helicopters at full capacity on this route, providing passengers with a service that is cheaper than Jet Airways but also faster than taking the train.

Based on the presumed demand for such a niche low-cost airline, along with the apparent lack of competition, it appears that Helios Air is a feasible idea. The business has a core revenue stream from individual passengers, with a further option to provide charter services for airlines by ferrying passengers to major hubs for connecting long-haul flights. On the surface, it seems that filling a helicopter with passengers should not be a serious problem for Helios, given that the largest helicopter in the world has a capacity of 63 people. However, this hypothesis will need to be tested by analyzing current passenger data, in order to ensure that Helios can be profitable even if its helicopters do not run at full capacity. Other costs must also be considered, including steadily increasing fuel prices and the substantial initial investments in both capital and labor.

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