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Airline Business Plan

Market Analysis Summary

Economic growth and the requirements of redevelopment, not to mention the impending entry of several countries in the region to the European Union, are creating increased demand for air services between Western Europe and the countries of Southeast Europe and Turkey.

The market combines a variety of elements all of which demand a higher quality of air service than often currently available:

  1. Business travelers requiring convenience, reliability, speed, and schedules built around business needs.

  2. Government and international organization travelers, requiring the same elements.

  3. Personal and leisure travelers from the Southeast Europe/Turkey region who have the money to travel by air and who increasingly demand a higher level of service and convenience, but at an economical cost.

  4. The "Diaspora," Personal and leisure travelers originally from the Southeast Europe/Turkey region, but now living and working in sizable numbers in the countries of Western Europe, with the same demands.

  5. Western European personal and leisure travelers, primarily traveling on the airline's routes between Western European points.

  6. Seasonal (primarily summer, with some limited niche markets in the winter period) holiday travelers, primarily destined for Greece, Turkey, and the islands of the Mediterranean. Cost, reliability, convenience, and destination are their concerns.

The proposed new airline will appeal to all these distinct groups by offering better quality service (and in some cases, offering service where none now exists), at a higher level of safety, comfort, and convenience, and at reasonable fares, than currently available. The new airline also will focus on the niche markets identified in the Service Description section of this plan, enabling it to better serve and to become identified as the carrier of choice for those markets.

4.1 Market Segmentation

A complete market analysis and segmentation will require a specific passenger and destination survey, the cost of which is included in the Start-up Costs for the airline.

Preliminary analysis (based on a variety of methods, including observation, interviews with travel- and airline-industry professionals, economic segmentation, future projections based on marketing plans, and experience with the region and market) for planning purposes, however, indicates the following approximate market segmentation overall (considerable variations, of course, would be anticipated depending on route, season, and other factors):

  • Business - 15%
  • Government and International Organizations - 10%
  • Regional Resident Personal and Leisure Travelers - 20%
  • Diaspora Personal and Leisure Travelers - 10%
  • Western European Personal and Leisure Travelers - 5%
  • Seasonal Holiday Travelers - 10%*

* The seasonal/holiday travel segment of the market to some degree distorts the overall market percentages, but might initially be anticipated for two reasons: first, it compensates for the drop in business and government travel that can be expected during the peak summer holiday travel season; second, a significant portion of this traffic is likely to be carried on flights employing specially chartered or wet-leased supplemental aircraft.

The accompanying Market Analysis table and chart below show total potential markets based on estimated population in each segment, as well as potential growth rates in air travel in the new airline's target market region within those segments, but do not reflect the anticipated passenger demand from those markets. Overall make-up of the airline's anticipated passenger loads by market segment are presented above.

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Reg Res Pers & Leis 20% 130,000,000 156,000,000 187,200,000 224,640,000 269,568,000 20.00%
Business 15% 5,000,000 5,750,000 6,612,500 7,604,375 8,745,031 15.00%
Government & IO 10% 1,500,000 1,650,000 1,815,000 1,996,500 2,196,150 10.00%
Diaspora Pers & Leis 10% 10,000,000 11,000,000 12,100,000 13,310,000 14,641,000 10.00%
Holiday Trav (seasonal) 10% 20,000,000 22,000,000 24,200,000 26,620,000 29,282,000 10.00%
W Europe Pers & Leis 5% 260,000,000 273,000,000 286,650,000 300,982,500 316,031,625 5.00%
Other 20% 5,000,000 6,000,000 7,200,000 8,640,000 10,368,000 20.00%
Total 10.82% 431,500,000 475,400,000 525,777,500 583,793,375 650,831,806 10.82%

4.2 Service Business Analysis

The overall airline industry operating between Western Europe and Southeastern Europe and Turkey consists of four primary segments:

  1. Established mainline European carriers (primarily Swiss International, Austrian, Lufthansa, Alitalia, Malev, Turkish) utilizing their Southeast European routes as spokes connecting to main hubs in Western Europe (or Budapest and Istanbul in the case of Malev and Turkish, respectively) and serving to feed traffic to their prime intra-European and trans-Atlantic routes (or domestic Turkish routes in the case of Turkish).

  2. Smaller, but generally well-established regional airlines primarily from Western Europe or the upper level of Eastern European states (primarily Swiss International, Tyrolean, and Adria) that perform essentially the same function as the mainline carriers or, in the case of carriers like Adria, link destinations in Southeast Europe to their own national capitals.

  3. Home-based Southeastern European carriers (such as ADA Air, Albanian Airlines, Avioimpex, Balkan Air, Hemus Air, JAT, and Tarom Airways) that often operate older, Soviet-built aircraft or turboprops, offer a generally lower level of service (though not always lower fares), and are often less highly regarded, including by travelers from Southeastern Europe. These airlines connect points within Southeast Europe, or they may connect Southeastern European destinations to major destinations in Western Europe.

  4. There also is a fourth segment worth noting, and that is the fairly significant charter market that exists within certain niche or seasonal markets. This market includes charter flights between Pristina and destinations in Switzerland and Germany, as well as primarily summer charters from Southeast Europe to New York and other destinations in North America. These charters are often operated by individual travel agencies or airlines, and often are categorized by a low level of service and utilization of older, often Soviet-built, aircraft. There also are the vacation charters that operate from Western Europe to Greece, Turkey, Cyprus, and the other holiday spots of Southeastern Europe and the Mediterranean.

It is anticipated that the proposed new airline would most closely fit into the second grouping above, but would compete effectively with all four main segments through a combination of a high level of safety and service, carefully selected routes, niche-market service, convenient schedules, reasonable and competitive fares, and modern, safe, comfortable aircraft. It also will offer service on under-served and unserved routes where little or no competition currently exists.

4.2.1 Main Competitors

The new airline's main competitors will vary depending on market and route served, and the category of passenger. For the most part, competition can be expected as follows:

Business and Government/IO segments to and from Southeastern EuropeFor SE European Regional and Diaspora Personal and Leisure TravelersFor Western European Personal and Leisure Travelers, as well as Business and Government/IO Travelers between Western European destinationsFor seasonal Holiday Travelers to Southeastern Europe and Turkey


AlitaliaAdriaAir France/Air InterAustrian
LufthansaAvioimpexBritish Airways/CityFlyer ExpressBritish Airways
MalevBalkan/HemusCroatianBritish Midlands
Swiss InternationalCroatianDeutsche Air BACyprus
TurkishJATKLM/KLM Cityhopper/KLM UKHapag Lloyd
--Swiss InternationalSAS
--TurkishSwiss International

The larger, more established carriers often suffer from a lack of flexibility, and a focus on feeding their main intra-European and trans-Atlantic routes. The smaller regional carriers often are focused almost exclusively on their own core regional service. The Southeastern European airlines often suffer from poor service and poor reputations. And the larger, more established charter operators are focused on the holiday charter and package market.

Again, the extent of competition (and what is listed here is not comprehensive) dictates the importance of the new airline's three-prong strategy to seek out unserved and under-served routes and city pairs, key niche markets where it can effectively compete or create its own market, and meeting peak travel demands on key regional, seasonal, and intermittent routes. It also points out the importance of standing out from the crowd through offering a higher level of service and convenience, and utilizing technology and a service-oriented staff to achieve recognition and passenger preference right from the outset.