Private aircraft chartering is an enticing industry for startups as well as established companies looking for a new venture. After all, it is potentially very lucrative, and the increasing popularity of flight-share and on-demand (sometimes called “Uber for X”) models means there is a large market that has yet to be tapped.
Still, it is not without risks: this relatively young industry has pitfalls that have led to the collapse of several companies in recent years. For companies and investors that have decided that the potential reward is worth the risk, here are a few mistakes to avoid, to give your business a better chance of success.
1. Misunderestimating the capital requirements
This alone has led to the downfall of numerous startups in the past couple of years, both related to the aviation industry and otherwise. Crowdfunding platforms and means to obtain venture capital may be plentiful nowadays, but it’s still important not to get carried away by the amounts you raise.
A private aviation-related business comes with not only a high initial capital requirement but also high operating costs; just because you’ve raised millions in venture capital, doesn’t mean that’ll be enough to sustain you until the profits roll in. Even if your company doesn’t own a fleet and instead acts as a broker for flights, don’t underestimate your costs: developing, running, and marketing a web service that works properly doesn’t come cheap.
2. Overestimating the demand
The failure of celebrity-backed startup companies made big news in 2016. This is very telling: in some cases, not even a sizeable heap of venture capital and the publicity generated by an entire roster of enthusiastic big-name celebrities can keep a business afloat.
A reason for this is overestimating the demand for a product or service. Hype does not necessarily mean demand, but it’s easy to confuse the two. When your idea gains momentum in media attention before you’ve even launched, it’s easy to think that the orders are going to start rolling in as soon as you’re live. This isn’t the case at all, especially for a service that comes with high price tags, such as private jet charters. Do comprehensive market research and be conservative with your estimates. Don’t fall for the hype.
3. Not choosing the right location
“Location, location, location” applies to aviation businesses as much as it does to real estate, as this more or less determines your demand and supply. Consider how steep the competition will be in that area as well.
Moreover, the area where you set up can determine your operating costs: taxes, insurance rates, fuel prices, costs of living (which can affect salaries and benefits), and office space expenses.
4. Not having supply guaranteed
“Uber for airplanes” startups tend to fold soon after they realize that “on-demand” flights aren’t always easy to guarantee whenever their clients, well, demand. If you sell memberships with the promise of convenient flights whenever customers need it, you had better make sure your arrangement with operators can provide that. Otherwise, the only demand you’ll end up with is for refunds. (Alternatively, some companies have kept the customers’ money, in which case the bad press spiraling out of control would spell the end of the business anyway.)