Photo - LLC 5th Ocean Airlines
52175

LLC 5th Ocean Airlines

Regional Air Tranportation

Russia, Moscow city
Market: Transport
Stage of the project: Prototype or product is ready

Date of last change: 16.05.2021
Min amount of loan
$  2.500.000
Estimated yield
6 % a year
Show contacts
0
Total required
$ 25.000.000
Rating
equalizer from 1000
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Idea

The purpose of the loan is to optimize the aviation route network of the Russian Federation based on the Ambraer 145 medium-haul aircraft (Brazil, 50 seats, 2850 km, range, 830 km/h); provision of low-intensity passenger traffic by direct air communication.

Current Status

The project is ready for implementation

Market

Organization of direct air service of low-intensity passenger traffic

Problem or Opportunity

Project financing needed

Competitors

 Presence of demand for flight routes.
Passenger flows for opening of direct connections with passenger flow intensity of 150 to 250 persons per week and organization of 3 to 5 flights per week are selected on the basis of the analysis of annual and monthly statistics of ticket sales from one city to another with transfer in intermediate airports. Less than 3 flights is not feasible, based on passengers' convenience, more than 5 flights, respectively, passenger flow over 250 persons - there is a risk of coming of air carriers operating high passenger capacity planes after testing of flights with ACs with 50 seat capacity. Therefore the destinations network is built along the routes with guaranteed passenger flow of 150 to 250 persons per week and lack of direct connection on these routes, which allows to assume with confidence that at least 80% of seats will be occupied (40 seats). Base tariffs are also determined based on average occupancy of 40 seats/flight with consideration of minimum profit of $400./f.h.
 Additional market segment that does not depend on passenger flow (guranteed payment for flight) - charter service. ACMI price established in this market is at least 150 000 rub. With Е145 sales for the price of 135 000 rub. profit will be at least 35 th./f.h. There are preliminary requests from the leading charter operators (appendix No. 3 in BP), that give grounds to expect 300-400 flight hours per month,

Advantages or differentiators

 Insufficient provision of direct air service for low-intensity passenger traffic - (150-200) people per week;
 relatively low initial investment;
 low fill rate risks;
 lack of significant competition;
 low seasonal dependence;
 low operating costs;
 availability of government support in the form of subsidies;
 lack of state fees for AC with up to 50 seats inclusively;
 high mobility of operational management of AC fleet size based on the market demand;
 wide range of AC uses for different flight distances – 300 to 2800 km for Е-145 and up to 4000 km for Е-170;
 high and stable growth rate of regional passenger air carriage that surpasses mainline flights by 12% per year (data from the Federal Air Transport Agency);
 lower impact of negative factors that affect passenger flows (ACs with higher passenger capacity get affected first of all);
 stimulating attitude of state regulation authorities towards regional carriers.

Finance

at the request of

Loan terms

36 months

Interest rate, %

6

Type of pledge

Another

Pledge and assets

SBLC of Standard Commerce Bank US NY

Business model

at the request of

Solution (product or service)

Attracting an investor

Team or Management

Risks

Risks
Operating:
 Possible malfunctions of AC are compensated by warranty maintenance agreement with manufacturers for airframe and engines. Deductions fr om flight-hour, specified in calculations. In case of breakdown of accessories and airframe elements – replacement within 36 hours. Engine – 48 hours. Reserve AC will be used during replacement period. Monthly flight hours and destinations network including reservation in accordance with the requirements of the Federal Air Transport Agency.
 Passenger accommodations in case of delays due to weather conditions, are not significant based on operations experience (not more than 0.5%) – compensated from reserve fund (KL) provident fund – airline.
 Breakdown (destruction) of AC – compensated by insurance coverage.
Financial
 Increase in price of fuel and lubricants – compensated by wholesale purchases.
 Service in airports – regulated by the state, air carriers are notified in advance, compensated by ticket prices.
 Competition – destinations network is built along the routes wh ere there are no other air carriers.
 Presence of demand for flight routes.
Passenger flows for opening of direct connections with passenger flow intensity of 150 to 250 persons per week and organization of 3 to 5 flights per week are selected on the basis of the analysis of annual and monthly statistics of ticket sales fr om one city to another with transfer in intermediate airports. Less than 3 flights is not feasible, based on passengers' convenience, more than 5 flights, respectively, passenger flow over 250 persons - there is a risk of coming of air carriers operating high passenger capacity planes after testing of flights with ACs with 50 seat capacity. Therefore the destinations network is built along the routes with guaranteed passenger flow of 150 to 250 persons per week and lack of direct connection on these routes, which allows to assume with confidence that at least 80% of seats will be occupied (40 seats). Base tariffs are also determined based on average occupancy of 40 seats/flight with consideration of minimum profit of 25 000 rub./f.h.
 Additional market segment that does not depend on passenger flow (guranteed payment for flight) - charter service. ACMI price established in this market is at least 150 000 rub. With Е145 sales for the price of 135 000 rub. profit will be at least 35 th./f.h. There are preliminary requests from the leading charter operators (appendix No. 3 in BP), that give grounds to expect 300-400 flight hours per month, wh ere profit will be:
350 f.h. Х 35 th. rub. = 12.25 mln./month Х 12 = 147 mln. per year.
 Seasonal factor has insignificant effect on ACs with 50 passenger capacity. It is compensated in calculations of average annual occupancy of seats and monthly flight hours.
 Other possible risks - compensated from reserve (credit line) and provident fund of the airline.

Incubation/Acceleration programs accomplishment

NO

Won the competition and other awards

NO

Photos

Photo 1 - Regional Air Tranportation
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Idea
Current Status
Market
Problem or Opportunity
Competitors
Advantages or differentiators
Finance
Financed earlier, $
Loan terms
Interest rate, %
Type of pledge
Pledge and assets
Business model
Solution (product or service)
Team or Management
Lead creditor
Risks
Incubation/Acceleration programs accomplishment
Won the competition and other awards
Invention/Patent
Photos
Product Video