Sky Palace Airways: New US Airline With 777s?

Filed Under: Other Airlines

On August 1, 2019, Sky Palace Airways became the latest airline to file with the US Department of Transportation for a certificate of public convenience and necessity.

The renderings of their cabins in the filing are incredible, and they sure live up to their “Sky Palace” name…

Okay, just kidding, that was an Emirates April Fools’ joke.

So, what is Sky Palace Airways? I take special interest in this because the investors are from Tampa (which is where I lived more than anywhere else in my life), and include an insurance executive, as well as a surgeon and philanthropist.

What’s their plan? According to their filing with the DOT:

  • They want to launch operations in January 2020
  • Their plan is to acquire two 777-200s at a cost of $11.5 million each; they say they have found suitable aircraft, and terms have already been negotiated
  • The filing states that the “maximum capacity of each plane is set at 400 seats”
  • They plan to be a charter operator, so they’ll operate flights on behalf of other airlines
  • The airline believes that thanks to their low cost structure they can offer the most competitive charter rates available, both for Hajj charters, as well as through long term arrangements with airlines

The business side of this is interesting as well, and their plans are made clear in this filing:

  • The airline will finance their 777s through 10 year loans; they’ll make a 20% down payment amounting to $4.6 million, and then will have about $102,000 per month in loan payments per aircraft
  • Sky Palace Airways expects to have contracts for 240 hours of revenue flying per plane per month, though conservatively is only counting on 150 hours of revenue flying per month
  • They expect to charge $7,500 per flying hour, not including fuel, passenger, or ground handling (which is the responsibility of the airline/organization on behalf of which they’re operating the flight)
  • The airline expects to have three sets of crew per plane, so would have six captains, six first officers, and 27 flight attendants
  • The airline expects to make $5 million of profits in the first 12 months

Bottom line

I am slightly amused by the name “Sky Palace” for a charter operator, especially one that will have 777s that have up to 400 seats.

In general I actually think this airline might not be a horrible idea, which I wasn’t expecting to say when I first saw the name of the airline? At a minimum, I think the concept of buying used 777s is underrated, given that they’re just a tiny fraction of the cost of new planes, and they’re relatively efficient.

All that being said, I do think Sky Palace may be a bit optimistic about their “worst case scenario.” I’m not sure the charter business is quite as robust and reliable as they hope:

  • Yes, there are 787 engine issues, but that’s a short term problem
  • When you’re operating a charter plane, the challenge is that your configuration won’t work for all airlines; so if they’re going for a dense configuration, that will eliminate the possibility of working with many full service airlines
  • Many low cost carriers have been in financial trouble lately, and the leisure business is also highly seasonal
  • No doubt there’s huge demand for Hajj charters, though I do find it interesting that even Hi Fly’s A380 can’t seem to find a contract there

I’ll be curious to see if this airline does in fact launch operations, and if so, who their customers are.

What do you make of Sky Palace Airways?

(Featured image courtesy of Aeropoints)

Comments
  1. 240BH per airframe at $7500PBH is delusional for year-round ad-hoc work. Unless they have a long term contract already locked-in, this will fail.

  2. What on earth happened to James and Spencer? Maybe I missed it but haven’t noticed an article by them in ages.

  3. They will be prone to operational disasters. Regional airlines run 5 crews per aircraft and the planes fly less than 240 hours per month.

  4. The 400 seats could be used for hajj charters, as people going on it do not demand luxury as long as they get there. Though, it only happens for a few weeks in the year.

  5. Why don’t any charter airlines invest in newer more fuel efficient planes? They’d be able to slightly undercut their competitors who are using older less efficient planes and the savings from the lower fuel burn will be profit.

  6. I think the reason Hi Fly’s A380 isn’t operating Hajj charters because those are heavily regulated by the Saudi government and have rigid capacity constraints. So while high-density configures widebodies are often used, I remember hearing about A380s specifically not being suitable.

  7. I don’t think Spencer is at TPG though?
    Also, for charter, lower utilizing rate must benefit from older planes.

  8. Like the old saying goes: “How do you make a small fortune in aviation? Start with a large one”
    These ventures are dicey, at best.

  9. Spencer went to God Save the Points and is now a partial owner from what I understand. James went to TPG UK.

  10. What did happen to HiFly’s big summer customer for the A380 that they were proudly boasting of earlier this year?

  11. Speaking of fancy names for charter airlines, there is a quite large Russian cheap charter airline called “Royal Flight”. There’s nothing royal about flying with them, trust me 🙂
    Plus they do have some strange non-charter routes, like Moscow-Taipei.

  12. @Vanya hah coincidentally came across them the other day. When I saw they had 777s I was hoping it featured a special cabin layout (a la Rossiya), but unfortunately it’s just old EK 777s in a Y/J comfiguration

  13. As for the name, many thongs sound great in one language or dialect but strange in English.
    “Sky Palace” probably sounds/seems better in the native language or dialect of one or more of their intended passenger groups.

  14. Secondhand 772’s, with 400 seats? Sounds more like upstairs/downstairs á la Downton Abbey rather than a Sky Palace. Can’t wait to see their fantasy advertising featuring images of the Taj Mahal.

  15. @Ben Holz yeah, most of these airlines in Russia don’t really care about their own identity or product.
    Another curious one is IrAero, who also has ex-Emirates 777s. They sell business class at significant price premium but the only difference is the seat. No special service, no better meals, no alcohol etc.
    I wonder what Royal Flight will do in terms of service, if anything.

  16. Ben, Not sure how this relevant ? “Yes, there are 787 engine issues, but that’s a short term problem”. They will be operating 777s.

  17. @Jake – aside from potential long wait for a new plane, you have both capital costs to buy the plane and operating costs to run it. While the operating costs may be, let’s say10% cheaper per seat, if the plane costs 10x, it isn’t worth it. Payback period would be munch longer. And, since charter is lower utilization, the fraction of costs that are capital vs operating are much greater

    Same reason you likely don’t own a Tesla even though it would be cheaper energy cost. If you don’t drive enough, hard to justify the much higher price relative to a nice reliable Honda Accord.

  18. @bassett because charter airlines are running 777s and others on behalf of airlines that have 787s that they can’t use because of the engine issues

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