An airline is a collection of aircraft and the people who get the aircraft into the air and back. These include pilots, flight attendants, mechanics, gate agents, ticket agents, dispatchers, baggage handlers, skycaps, reservations agents, and the managers who look over their shoulders.

Airlines have to be big companies by definition. They have to either purchase or lease at least one aircraft, and preferably more than one for each route they plan to operate. These aircraft have to be insured, fueled, and maintained. Every time they take off, land, or sit at a gate, the airline has to pay fees to the airport authority. Food and other amenities cost money. Paying all the employees costs money. If you want to start an airline, you'd better have lots of capital, and a thorough knowledge of the concepts explored in this writeup.

History

The American Airline Industry

After Orville and Wilbur Wright flew the first heavier than air airplane in 1903, the airplane languished in commercial obscurity for ten years, viewed mainly as a silly toy. In 1914, the world's first scheduled airline service began between Tampa and St. Petersburg, FL, charging $5 for each one-way trip across Tampa Bay. The airplane's commercial success before World War I was very limited, but following the war, the United States suddenly found itself swamped with aviators. Many decided to take their war-surplus aircraft on barnstorming campaigns, performing acrobatic maneuvers to woo crowds.

In 1918, the United States Postal Service won the financial backing of Congress to begin experimenting with air mail service, initially using Curtiss Jenny aircraft that had been procured by the United States Army for reconaissance missions on the Western Front. The Army was the first to fly these missions, but quickly lost the contract when they proved to be too unreliable. By the mid-1920's, the Postal Service had developed its own air mail network, based on a transcontinental backbone between New York and San Francisco. To supplant this service, they offered twelve contracts for spur routes to independent bidders: the carriers that won these routes would, through time and mergers, evolve into Braniff Airlines, American Airlines, United Airlines (originally a division of Boeing), Trans World Airlines, Northwest Airlines, and Eastern Airlines, just to name a few.

Passenger service during the early 1920's was sporadic at best: most airlines at the time were focused on carrying bags of mail. In 1925, however, Ford Motor Company bought out the Stout Aircraft Company and began construction of the all-metal Ford Trimotor, the first successful American airliner. With a 12-passenger capacity, it blew every other commercial aircraft of the time out of the water, and made passenger service not only possible, but potentially profitable. Air service became parallel to rail service in the American transportation network.

At the same time, Juan Trippe began a crusade to create an air network that would link America to the world, and he achieved this goal through his airline, Pan American Airways, with a fleet of flying boats that linked Los Angeles to Shanghai and Boston to London. Pan Am was the only U.S. airline to go international before World War II broke out, and quickly became a symbol of the potential of the American airline industry.

With the introduction of the Boeing 247 and Douglas DC-3 in the 1930's, the U.S. airline industry continued to build up profitability, despite the overhanging Great Depression. It would not be until after V-J Day that airlines would truly begin to soar.

The European Airline Industry

The first countries in Europe to embrace air transport were France and Germany. France begain an air mail service to Morocco in 1919 that was bought out in 1927, renamed Aeropostale, and pumped with capital to become a major international carrier. In 1933, Aeropostale went bankrupt, was nationalized, and became Air France.

The Germans began their airline industry with Lufthansa in 1926, which, unlike other airlines at the time, became a major investor in airlines in the developing world: they founded Varig and Avianca, among others. German airliners built by Junkers, Dornier, and Fokker were the best in the world at the time. The peak of German air travel came in the mid-1930's, when Nazi propaganda ministers approved the start of commercial zeppelin service: the big, ominous airships were perfect as a symbol of Aryan might, but the fact that they used flammable hydrogen gas raised safety concerns that culminated with the Hindenburg disaster of 1937.

Britain's flag carrier during this period was Imperial Airways, which became BOAC (British Overseas Airlines Co.) in 1939. Imperial Airways used huge Handley-Page biplanes for routes between London, the Middle East, and India: images of an Imperial airplane in the middle of the Rub'al Khali, being maintained by a group of Bedouins, are some of the most famous pictures from the heyday of the British Empire.

The Postwar Airline Industry

World War II, like World War I, kick-started the airline industry. Many airlines in the Allied countries had become rich by leasing their airplanes to the military, and were eager to spend this money on the new flagships of air travel such as the Boeing Stratocruiser, Lockheed Constellation, and Douglas DC-6. Most of these new aircraft were based on American bombers such as the B-29, which had spearheaded research into new technologies such as pressurization.

In the 1950's, the De Havilland Comet, Boeing 707, Douglas DC-8, and Sud Caravelle became the first flagships of the Jet Age in the Free World, while the Soviet Union countered with the Tupolev Tu-104 and Tupolev Tu-124 in the fleets of Aeroflot and Interflug. The Lockheed L-188 Electra inaugurated turboprop transport.

The next big boost for the airlines would come in the 1970's, when the Boeing 747, McDonnell Douglas DC-10, and Lockheed Tristar inaugurated widebody ("jumbo jet") service, which is still the standard in international travel. The Tupolev Tu-144 and its Western counterpart, Concorde, made supersonic travel a reality. And in 1972, Airbus began producing Europe's most successful line of airliners to date.

Sadly, the late 1970's, hit by the oil crisis and U.S. deregulation, spelled the beginning of the end for many airlines the world over, and shepherded in a new era of low-cost airlines, spearheaded by Laker Airways and Southwest Airlines. Pan Am, Eastern, and other mainstays of air travel disappeared from the map.

And, of course, one of the worst tragedies in the airline industry to date is September 11, 2001.

Strategies

Major Airlines

In the United States, the "major airlines" are the airlines that offer nationwide and international route networks with two or three-class service: the "Big Three" are American Airlines, United Airlines, and Delta Airlines, and the smaller three are Continental Airlines, Northwest Airlines, and US Airways. Major airlines are based around a hub and spoke route network, where each airline chooses several key cities as hubs, and runs spoke-like routes from each hub to its surrounding cities. If you fly from New Orleans to Seattle on Delta, you will probably connect in Dallas Fort Worth or Atlanta. On United, you will probably connect in Chicago.

Outside the US, a "major airline" is generally any airline that operates transoceanic service. In Ireland, for example, Aer Lingus is the major airline, even though Ryanair is bigger and much more profitable.

Major airlines capitalize on business travelers, who need to have a reliable way to get from point A to point B on a moment's notice. All of the majors have accounts with corporations close to their hub cities, so since executives are essentially flying on expense accounts, they are willing to pay out the nose for caviar and leather seats, especially on a 23-hour flight to Singapore. One little-known fact about major airlines is that they make half of their profit off of first class and business class passengers, most of whom are actually traveling on redeemed frequent flyer miles and are therefore not making the airline any money at all. So the rich bastard in front is more important to the airline's livelihood than you might think.

Today's international airline alliances, such as the Star Alliance, oneworld, and SkyTeam, emerged out of the earlier practice of interline codeshares, where two airlines would sell seats on each other's flights. This was yet another way to get corporate customers to develop brand loyalty to one particular airline or another. American, for example, only flies into Asia as far as Narita, but through the magic of its relationship with Japan Airlines can claim to have a route network extending as far as Bangkok. Likewise, JAL can sell tickets to Boston, Atlanta, and Miami, cities it doesn't actually serve. The alliances also allow airlines to share VIP lounges and frequent flyer miles, which further helps to instill brand loyalty on people with money.

All the high-profile mergers that have characterized the major airline industry for the past twenty years come from this basic core of their existence: being bigger and badder than everyone else.

Low-Cost Carriers

The success of low-cost airlines began in the 1970's, when rising fuel prices and rising numbers of pleasure travelers created a viable market for no-frills air travel. Southwest Airlines was the first US airline to perfect the low-cost carrier model, and is the largest such airline in the world today, with a fleet of over 200 aircraft that rivals the smaller majors. On the other hand, many other airlines based around this model, like Laker Airways, Valujet, and Midway Airlines, folded and died miserable corporate deaths.

There are two main disadvantages to low-cost airlines from an operational standpoint. First, low-cost carriers have to outsource everything: maintenance, pilot training, and often ground staff at the airport. Often, this makes their service sub-par: in Valujet's case, it killed the company by burying the entire complement of a DC-9 alive in Everglades mud. At the very least, it means that the airline can't operate its planes as cheaply as the majors do, which means that the lower fares have to be compensated for elsewhere. Low-cost carriers also (usually) have much less financial leeway than their major brethren: if an airplane crashes, or something else goes wrong, the entire company is screwed.

The low-cost carriers that succeed stress simplicity: direct routes between major cities, no meals or other in-flight perks, and minimal personnel. For most casual air travelers, this level of service is enough, and the cheapo airlines know this. The smarter low-cost startups, like Ryanair and jetBlue, get enough capital in the beginning to stay afloat without resorting to credit and other "money on paper," which allows them to make a minimal profit while building a consumer base.

Specialty Carriers

Many airlines make money by flying where nobody else flies. If you want to go to Bhutan, better fly Druk Air. The only way you'll get to Mombetsu is on All Nippon Airways. Going to Barrow? Hop on Alaska Airlines. Many airlines also make money by flying in a way that nobody else replicates. Midwest Express connects Milwaukee and Indianapolis with other cities in the region, and offers all-first class service where you can get a freshly-baked cookie at your seat while drinking well-vintaged wine. British Airways and Air France provide the only way to get across the Atlantic Ocean in less than 4 hours.

However, the term "specialty carrier" generally refers to tiny airlines that fly over a limited and unique route network. In Florida, we have Cape Air, a little outfit that flies little planes between the little airports in Key West, Naples, and Marathon. On the other coast, we have Chalk's International Airlines, which takes flying boats from the Port of Miami to Freeport and Nassau in the Bahamas.

Some specialty carriers are so successful that they turn into majors. Virgin Atlantic was one of these: it started life as a specialty carrier flying 747's from Kennedy to Gatwick, and now has a huge international network.

Why Do So Many Airlines Suck?

Because they have to spend a lot of money, while at the same time keeping fares competitive. They compensate for this by lowering wages, which leads to pissed off employees, and by cramming more people onto airplanes and not feeding them.

Also, because their managers are either:

1. Incompetent employees who were kicked upstairs, and know nothing at all
2. Former accounting personnel who know nothing about airplanes
3. Former operations personnel who know nothing about business administration

Unlike, say, retail, there's no way to become well-versed in both the operational and financial side of running an airline at the same time, so airline managers are, for the most part, very familiar with one half of the equation and totally ignorant of the other half.

So, if you want to start an airline that doesn't suck, LEARN BOTH SIDES OF THE EQUATION!

This has been a public service announcement, and an attempt to wake you up. Thank you for your time.