In the last few days, I have focused on making my idea network more diverse. I established contact with StartupBoeing, a division of Boeing that exists to help aviation entrepreneurs navigate and adapt to the various challenges in the industry. By talking to members of their team, I hope to develop a credible database of information about the competitive landscape surrounding my idea.
This week, I focused on getting an overview of industry trends and substitute products. I confirmed my initial suspicion about this venture: it is really difficult to start an airline in the current market. Although the global aviation industry is picking up, with passenger growth expected to average 5%/year for the next 20 years, airlines have begun devoting their entire efforts towards capacity utilization. In order to cope with a variety of dismal macroeconomic factors, especially unprecedented triple-digit oil prices, today’s airlines require incredibly efficient, low-cost planes in order to maintain and boost profits. Companies like Boeing and Airbus have met this demand by creating new fuel-efficient fixed-wing aircraft; however, this presents a problem in my business idea.
Up until now, I had assumed that there would be a low-cost, high-capacity helicopter that would be more efficient to operate than the closest substitute product (a fixed-wing aircraft). I now had to test my hypothesis – and I quickly found many articles online claiming helicopters to be far less fuel-efficient than fixed-wing planes. Most of these claims were unsubstantiated, so I did my own analysis, comparing several high-capacity helicopters to the substitute fixed-wing aircraft that are popular on short-haul routes:
|MODEL||Aircraft or Helicopter?||Passenger Capacity (1-class configuration)||Flight Range (nautical miles)||Fuel Cost ($ per nautical mile)||Average Aircraft List Price ($ millions)|
|Bell Boeing V-22 Osprey||Helicopter||24||879||13.75||68.0|
|Boeing 234 Chinook||Helicopter||34||540||22.22||38.55|
It is obvious that helicopters have less passenger capacity than their fixed-wing substitutes, and I expected lower flight range as well. However, there are several helicopters that have lower fuel costs per nautical mile than regular aircraft, such as the Sikorsky S-76C++. I did a back-of-the-envelope calculation and found the fuel cost per passenger to be similar between the 737 and the S-76C++. This posed a major question: given these numbers, how can I expect to compete on a cost basis with fixed-wing airlines?
The answer is simple, but presents yet another assumption in my idea. Traditional low-cost airlines don’t pass on 100% of fuel costs to passengers in the form of fare increases; instead, they find alternative revenue streams to make up this burden (e.g. charging for on-board services). I will need to hunt for these additional revenue streams if this idea is to be somewhat viable. Looking for niche cost savings is also a good idea – for instance, landing fees at helipads are much lower than those charged to regular airlines at major airports. There is a lot more research to be done, with several new hypotheses to be tested and calculations to be made.