Overview Of Baltia Airlines
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
Baltia Air Lines, Inc. the “Company” or “Baltia” or “Baltia Air Lines”) is the only Part 121 (heavy jet operator) start-up airline in the United States today that has received Government fitness approval. The Company is currently in the second phase of the FAA Air Carrier Certification. The Company is a New York State corporation, organized in the State of New York on August 24, 1989.
On December 19, 2008, the U.S. Department of Transportation (DOT) issued its Order to Show Cause, finding that the Company is fit, willing and able to engage in international air transport of persons, property and mail. The Company was awarded the non-stop route from JFK to St. Petersburg Russia. Baltia was also authorized for worldwide charter services.
On August 18, 2009, the Company purchased Boeing 747 aircraft (N705BL). In 2010 the Company purchased a second Boeing 747 aircraft (N706BL). The Company leased engines on a power-by-the-hour basis, which are installed on the aircraft. On January 11, 2012 the Company sold Boeing 747 aircraft (N705BL).
In the third quarter of 2012, the Company opened an office in Ypsilanti, Michigan, where flights crews will undergo flight training. Also, at this location, major aircraft maintenance will be completed on a contract basis by an aircraft maintenance contractor. This location will also serve as the Company’s flight operations center.
The Company currently carries $100,000,000 aircraft liability insurance, and has placed $10 million airline liability insurance through Aviation Risk Management Associates meeting the regulatory requirement in preparation for the commencement of revenue operations.
Following the commencement of service on the JFK-St. Petersburg route, the Company’s objective is to develop its route network to Russia, Latvia, Ukraine, and Belarus.
We intend to provide full service, i.e. passenger, cargo and mail, and will not be dependent upon one or a few major customers. The Company has two registered trademarks "BALTIA" and "VOYAGER CLASS" and five trademarks are subject to registration.
There is currently no non-stop service from JFK to St. Petersburg. Connecting service is provided mainly by foreign carriers. Finnair, Lufthansa and SAS are the leading competitors in the US-Russia market. KLM, British Airways, Air France, Austrian Airlines, and Swissair also provide service. However, foreign carriers are required to have intermediate stops at transit airports in their respective countries (Helsinki, Frankfurt, Stockholm, Copenhagen, etc.) because they are “third nation” airlines and as such cannot fly directly between the US and Russia (only a US airline as well as a reciprocating Russian airline is eligible to fly nonstop). Delta and two Russian airlines, Aeroflot and Transaero, currently operate between JFK and Moscow. With the exception of the JFK-Moscow route, there is no other non-stop competitive air transportation service on the routes for which the Company intends to apply.
The Company’s objective is to establish itself as the leading non-stop carrier in the market niche over the North Atlantic with operations that are profitable and growing over time. In order to accomplish this objective, we intend to establish and maintain high quality service standards which we believe will be competitive with the European airlines currently providing connecting flights. The Company does not expect to be in direct competition with deep discount airlines, including several East European airlines and the offspring of the former Soviet airline Aeroflot, which provide connecting flights.
The Company intends to provide First, Business, and Voyager Class accommodations. The Company’s passenger market strategy is tailored to particular preferences of the various segments of its customer base, with marketing attention particularly focused on American business travelers with interests in Russia who require high quality, non-stop service from the United States to Russia.
The Company’s initial marketing strategy is based on existing agencies specializing in the market, selected travel and business publications, supplemented by direct mailings to corporate travel planners, and individual American businesses that are currently involved in Russia. Soon after the inauguration of flight service, the Company plans to implement its frequent flyer program. As the marketing matures, the Company plans to advertise to the general public throughout the US, and in Russia. The Company also plans to sponsor selected industry and trade events in the US and in St. Petersburg.
The Company intends to provide customer service and reservations centers in New York and in St. Petersburg, to list the Company's schedules and tariffs in the Official Airline Guide, and provide world-wide access to reservations on the Company’s flights through a major Computer Reservations and Ticketing System (“CRS”).
The Company intends to activate its reservations service when the DOT issues its order authorizing the Company to sell tickets.
The Company has identified the following market segments in the U.S.-Russia market: (i) Business Travelers, (ii) General Tourism, (iii) Ethnic Travelers, (iv) Special Interest Groups, (v) Professional Exchanges, and (vi) Government and Diplomatic Travel.
The Company believes that the direct non-stop service to be offered by it will be superior to the stop-over service currently offered by foreign airlines. A comparison between the two services with respect to passenger convenience and cargo transport efficiency is set forth below.
BALTIA - US flag, non-stop service: With non-stop service, a passenger can fly from JFK to St. Petersburg in about 8 hours in a Boeing B747 wide body airplane. Cargo arrives containerized, palletized, and secure.
Foreign, stop-over journeys: With stop-over service, it would take a passenger 10 to 18 hours to fly through Helsinki, Copenhagen, Moscow, or Frankfurt on a foreign carrier. In addition, passengers must change to narrow-body aircraft at a layover airport. Cargo is “broken up” and manually loaded onto narrow-body aircraft, or trucked from Helsinki.
The Company plans to operate efficiently and provide consistent high quality service to passengers and cargo shippers alike in order to establish the Company as the preferred airline in the market. The Company also plans to use targeted marketing of its service to maintain and grow its market share.
Because of the increased reliability and comfort of a non-stop flight, the Company expects to capture a portion of the existing traffic.
With the Boeing 747 true wide-body aircraft, the Company intends to provide cargo service from JFK to St. Petersburg, offering containers, pallets, and block space arrangements. The Company expects to carry contract cargo for express shippers. The Company also plans to market its own “Baltia Courier”, “Baltia Express”, and “Baltia Priority” express service for letters and packages. The Company also expects revenues from diplomatic mail and cargo, under the Fly America Act.
The Company has passenger service and ground service arrangements at JFK and at Pulkovo II Airport in St. Petersburg. As a US carrier flying into a foreign country, the Company will be eligible to the same degree of priority that a foreign carrier receives when arriving in the US.
The Company intends to start the JFK-St. Petersburg service with one round-trip flight per week, increase frequency to three round trips and then to five round trips per week.
The Company plans to build operating modules and apply them in developing new markets. Once established, the Company plans to duplicate its JFK-St. Petersburg standards on flights on other transatlantic routes.
Additional revenues from charter flying: In conjunction with its Part 121 air carrier certification (“Part 121”), (referring to a “Federal Aviation Regulations” number, is an industry acronym used to describe a US airline operating heavy jet aircraft) for scheduled service, the Company intends to seek certification for worldwide charter service. Following certification, the Company plans to utilize aircraft time available between scheduled service, to earn additional revenues from charters. We are also considering qualifying our aircraft for military contracts.
In order to start revenue generating flight operations, the Company has to complete FAA Air Carrier Certification. During the past two and half years, the Company has been participating in air carrier certification.
The Company will carry airline liability insurance as required for a US airline by DOT regulation.
As of March 31, 2013, the Company had a staff of thirty which includes professionals who have extensive major US airline experience in aircraft maintenance, airline operations, airline regulatory compliance, reservation, information technology, passenger service and administration.
March 31, 2013 Baltia Airlines 10-Q:
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
Baltia Air Lines, Inc. the “Company” or “Baltia” or “Baltia Air Lines”) is the only Part 121 (heavy jet operator) start-up airline in the United States today that has received Government fitness approval. The Company is currently in the second phase of the FAA Air Carrier Certification. The Company is a New York State corporation, organized in the State of New York on August 24, 1989.
On December 19, 2008, the U.S. Department of Transportation (DOT) issued its Order to Show Cause, finding that the Company is fit, willing and able to engage in international air transport of persons, property and mail. The Company was awarded the non-stop route from JFK to St. Petersburg Russia. Baltia was also authorized for worldwide charter services.
On August 18, 2009, the Company purchased Boeing 747 aircraft (N705BL). In 2010 the Company purchased a second Boeing 747 aircraft (N706BL). The Company leased engines on a power-by-the-hour basis, which are installed on the aircraft. On January 11, 2012 the Company sold Boeing 747 aircraft (N705BL).
In the third quarter of 2012, the Company opened an office in Ypsilanti, Michigan, where flights crews will undergo flight training. Also, at this location, major aircraft maintenance will be completed on a contract basis by an aircraft maintenance contractor. This location will also serve as the Company’s flight operations center.
The Company currently carries $100,000,000 aircraft liability insurance, and has placed $10 million airline liability insurance through Aviation Risk Management Associates meeting the regulatory requirement in preparation for the commencement of revenue operations.
Following the commencement of service on the JFK-St. Petersburg route, the Company’s objective is to develop its route network to Russia, Latvia, Ukraine, and Belarus.
We intend to provide full service, i.e. passenger, cargo and mail, and will not be dependent upon one or a few major customers. The Company has two registered trademarks "BALTIA" and "VOYAGER CLASS" and five trademarks are subject to registration.
There is currently no non-stop service from JFK to St. Petersburg. Connecting service is provided mainly by foreign carriers. Finnair, Lufthansa and SAS are the leading competitors in the US-Russia market. KLM, British Airways, Air France, Austrian Airlines, and Swissair also provide service. However, foreign carriers are required to have intermediate stops at transit airports in their respective countries (Helsinki, Frankfurt, Stockholm, Copenhagen, etc.) because they are “third nation” airlines and as such cannot fly directly between the US and Russia (only a US airline as well as a reciprocating Russian airline is eligible to fly nonstop). Delta and two Russian airlines, Aeroflot and Transaero, currently operate between JFK and Moscow. With the exception of the JFK-Moscow route, there is no other non-stop competitive air transportation service on the routes for which the Company intends to apply.
The Company’s objective is to establish itself as the leading non-stop carrier in the market niche over the North Atlantic with operations that are profitable and growing over time. In order to accomplish this objective, we intend to establish and maintain high quality service standards which we believe will be competitive with the European airlines currently providing connecting flights. The Company does not expect to be in direct competition with deep discount airlines, including several East European airlines and the offspring of the former Soviet airline Aeroflot, which provide connecting flights.
The Company intends to provide First, Business, and Voyager Class accommodations. The Company’s passenger market strategy is tailored to particular preferences of the various segments of its customer base, with marketing attention particularly focused on American business travelers with interests in Russia who require high quality, non-stop service from the United States to Russia.
The Company’s initial marketing strategy is based on existing agencies specializing in the market, selected travel and business publications, supplemented by direct mailings to corporate travel planners, and individual American businesses that are currently involved in Russia. Soon after the inauguration of flight service, the Company plans to implement its frequent flyer program. As the marketing matures, the Company plans to advertise to the general public throughout the US, and in Russia. The Company also plans to sponsor selected industry and trade events in the US and in St. Petersburg.
The Company intends to provide customer service and reservations centers in New York and in St. Petersburg, to list the Company's schedules and tariffs in the Official Airline Guide, and provide world-wide access to reservations on the Company’s flights through a major Computer Reservations and Ticketing System (“CRS”).
The Company intends to activate its reservations service when the DOT issues its order authorizing the Company to sell tickets.
The Company has identified the following market segments in the U.S.-Russia market: (i) Business Travelers, (ii) General Tourism, (iii) Ethnic Travelers, (iv) Special Interest Groups, (v) Professional Exchanges, and (vi) Government and Diplomatic Travel.
The Company believes that the direct non-stop service to be offered by it will be superior to the stop-over service currently offered by foreign airlines. A comparison between the two services with respect to passenger convenience and cargo transport efficiency is set forth below.
BALTIA - US flag, non-stop service: With non-stop service, a passenger can fly from JFK to St. Petersburg in about 8 hours in a Boeing B747 wide body airplane. Cargo arrives containerized, palletized, and secure.
Foreign, stop-over journeys: With stop-over service, it would take a passenger 10 to 18 hours to fly through Helsinki, Copenhagen, Moscow, or Frankfurt on a foreign carrier. In addition, passengers must change to narrow-body aircraft at a layover airport. Cargo is “broken up” and manually loaded onto narrow-body aircraft, or trucked from Helsinki.
The Company plans to operate efficiently and provide consistent high quality service to passengers and cargo shippers alike in order to establish the Company as the preferred airline in the market. The Company also plans to use targeted marketing of its service to maintain and grow its market share.
Because of the increased reliability and comfort of a non-stop flight, the Company expects to capture a portion of the existing traffic.
With the Boeing 747 true wide-body aircraft, the Company intends to provide cargo service from JFK to St. Petersburg, offering containers, pallets, and block space arrangements. The Company expects to carry contract cargo for express shippers. The Company also plans to market its own “Baltia Courier”, “Baltia Express”, and “Baltia Priority” express service for letters and packages. The Company also expects revenues from diplomatic mail and cargo, under the Fly America Act.
The Company has passenger service and ground service arrangements at JFK and at Pulkovo II Airport in St. Petersburg. As a US carrier flying into a foreign country, the Company will be eligible to the same degree of priority that a foreign carrier receives when arriving in the US.
The Company intends to start the JFK-St. Petersburg service with one round-trip flight per week, increase frequency to three round trips and then to five round trips per week.
The Company plans to build operating modules and apply them in developing new markets. Once established, the Company plans to duplicate its JFK-St. Petersburg standards on flights on other transatlantic routes.
Additional revenues from charter flying: In conjunction with its Part 121 air carrier certification (“Part 121”), (referring to a “Federal Aviation Regulations” number, is an industry acronym used to describe a US airline operating heavy jet aircraft) for scheduled service, the Company intends to seek certification for worldwide charter service. Following certification, the Company plans to utilize aircraft time available between scheduled service, to earn additional revenues from charters. We are also considering qualifying our aircraft for military contracts.
In order to start revenue generating flight operations, the Company has to complete FAA Air Carrier Certification. During the past two and half years, the Company has been participating in air carrier certification.
The Company will carry airline liability insurance as required for a US airline by DOT regulation.
As of March 31, 2013, the Company had a staff of thirty which includes professionals who have extensive major US airline experience in aircraft maintenance, airline operations, airline regulatory compliance, reservation, information technology, passenger service and administration.
March 31, 2013 Baltia Airlines 10-Q:
