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It is interesting to note that, in the light jet end of the market, we know of no company that has successfully commenced operations, that has then failed for technical reasons such as a regulatory breech or, heaven forbid a poor safety record. The failures have all been for commercial reasons, and are largely due to misreading the market, and thus failing to achieve the requisite cash-flow to keep the business afloat and investors “on side”. In aviation, more so than most industries, the initial focus of the company has to be highly technical in nature. Consequently the preponderance of people skills that are required tend to be technical, rather than commercial. Achieving an AOC generally requires an aircraft to be identified, which in turn drives a need to decide upon an aircraft (asset) strategy early on. As we have discussed in previous articles, cash flow really is king and accurate forecasting of cash flow is critical. The aircraft (or asset in commercial parlance) will probably be the largest drain of cash after your staff. There are generally 3 options. These are outright purchase (heavy initial cash flow hit); leasing (moderate initial cash flow hit); managing another’s aircraft (generally the lowest initial cash flow hit). Remember that a start-up is unlikely to be able to achieve much institutional debt financing, so investment will tend to be equity based, and thus a direct influence on the running of your company. Even before you have decided upon the aircraft you want to operate, hopefully you will have done extensive analysis of the market you hope to sell into. Who your customers will be should drive your route choices, base location and aircraft selection. Once you truly understand the market you are entering, then you can decide the platform (or aircraft) you will deploy. Once again, not a skill set technical aircraft people will generally have in their armoury. People decisions are crucial. How well people work together, and how their skills complement each other is of paramount importance in a small start-up enterprise. The founder will have to be ruthlessly critical of his or her own abilities, for example the skill sets to incept an enterprise may not be the best ones to steward a successful start-up onto a mature growth path. Is the company well governed from a corporate perspective, or is the board heavily skewed by the founders or the investors? A non-executive director who is truly independent will be incredibly valuable in helping steer strategy and providing constructive challenge to the executive team who generally are mired in day to day issues. A non-executive director also has the luxury of viewing the external environment independent of the start-up situation, investors or the management team so can often bring valuable knowledge to the commercial strategy. Finally – highly flexible tools to measure and manage your business metrics are crucial. Knowing your customers’ habits and being able to predict these, as well as being able to price flexibly according to the business cycle is really valuable. Much has been written about the value of the balanced scorecard. You need measures on your scorecard (or dashboard if you prefer) which cover all of the key levers available to your management team, both historical and predictive measures. If something is not going to plan, change the plan, and in all cases keep your stakeholders closely involved. The score card should be optimally employed with a distinct and directly relevant corporate strategy in mind. In the case of a VLJ air taxi, this could be safety, for example. Your new customers will be very conscious that they are flying with a new start-up operator of new class of aircraft, flying “tiny” airplanes with which they are unfamiliar and a perception of safety will be their key concern. This is just one example of how operators and business people should work together to create a meaningful balanced scorecard which instills the right corporate culture and makes key strategic / technical aims measurable and traceable. Technical operators and commercial individuals need not collide in the aviation start-up world – as long as their roles and responsibilities are clear and there is mutual respect for these roles. One cannot exist without the other!
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