13-Jul-2015 11:39 AM

Regional Airline Restructuring Part 4: Roundup of the new premium business aviation models emerging

Analysis

Part 3 of this series on regional airlines introduced the theme that US airlines have spent billions of dollars improving business and first cabins, updating lounges and terminals, providing fast tracks through security and generally upping their game with additional amenities such as lie-flat seats

But it questioned whether they are doing enough to meet the market demand for high end convenience.

This report, Part 4 in our survey of US regional airline restructuring, looks at some of the specific models that are evolving to target these potential markets.

A short list of the emerging models that are hoping to change the way business travellers behave

OneJet – charters where commercial services have declined

OneJet is picking up where Midwest Airlines left off. Midwest grew out of business aviation from the Kimberly Clark corporate shuttle. Recently, OneJet launched Milwaukee-Indianapolis with Monday through Thursday service as a scheduled Part 135 charter using seven-passenger Hawker 400XP business jets operated by Pentastar Aviation.

It hopes to expand to Pittsburgh and other points with reduced commercial service. Significantly, tickets are being offered through distribution systems including those catering to corporate travel managers such as American Express Global Business Travel and Carlson Wagonlit.

Imagine Air – buy and charter

Imagine Air, using a single-engine Cirrus aircraft accommodating the typical one-to-two person business trip, targets those now driving three-to-eight hours. It experienced 40% growth in 2014.

“We want to create something that is disruptive that changes what the traditional charter or regional airline can provide,” said Hamilton. “We are trying to open business aviation to a whole new segment. People are now starting to value their time again and getting off the road. If you can make it affordable and accessible they will come. You don’t have to become a member to book a flight. Our average flight is about USD1,200 for the entire aircraft, which is very affordable although it could vary because we have dynamic pricing. You can book a flight online, in real time without any barriers.”

Imagine Air uses a more typical business aviation model in which its customers buy the aircraft minimising their cost of ownership by allowing an operator to manage the aircraft while offering charter services. The company has 11 leased aircraft. “It is the only way to buy an airplane and fly for free,” said Hamilton. “It is a popular program and a good way to grow.”

Surf Air - membership model

Perhaps the most interesting new model is Surf Air, the first membership, all-you-can-fly club. It is a Part 135, California-based intra-state air taxi operation but is working on its inter-state authority.

“When you look at our model from the business perspective we have this great cost clarity because we are scheduled,” CEO Jeff Potter told CAPA. “Normally, with business aviation, you never knew what the cost was going to be. Our members pay USD1,750 per month plus USD1,000 initiation fee and they can fly as much as they want. It is all done with a mobile app. You can book in 20 seconds.”

Potter called the company the Netflix of the air and, tellingly, compared Surf Air to the beginnings of the low-cost industry. Notably, Texas and Florida are high on Surf Air’s list of expansion markets.

“We grew from 300 members to 1,400 members just in 2014,” said Potter. “We focus on flights of about one and a half hours, which is the same as Southwest did when it first started its intra-state service. We target markets that are highly overpriced. We fly into private terminals in order to bypass the stress at large commercial airports. About 65% of our customers previously flew commercially while 15% drove. Those are important metrics because we are offering the experience and efficiency of business aviation at the affordability of a commercial flight. Our members get to know our pilots and other regular passengers and that builds a sense of community that you don’t find anywhere. Our passengers love interacting with each other. Our survey concluded 11% of our members have engaged in, begun or completed a business deal through our flights.”

JetSuite – charters and empty legs

JetSuite not only charters its four-passenger Embraer Phenom 100 and seven-passenger Cessna CJ3 jets but offers empty-leg flights. “Thirty-five percent of our flights are empty legs and we sell them for a little over USD500 per flight,” Rabin told CAPA. “These are, however, last minute deals and you have to have very flexible travel plans.” It sells about 30 per month. JetSuite also forged a partnership with Singapore Airlines to connect in-bound Los Angeles passengers to Las Vegas but that amounts to a trip every other month.

Ubair - app-driven

App-driven Ubair is in the U.S.-Canada-Caribbean markets offering varying levels of service from turboprops (ubairTaxi) at USD2,900 to Gulfstreams (ubairHeavy) at USD21,500 from which Ubair takes about 10% for its booking fee. It promises an “instant, bookable, one-way quote” and does not require membership fees or deposits.

Ubair’s co-founder David Tait explained that a multi-person trip is a little more expensive than a commercial flight but without all the hassles. He described a family ski vacation that would have cost USD500 per person for a family of five and taken six hours door to door by air. The Ubair trip cost as little as USD2,000 for the aircraft and took an hour and a half.

JetSmarter – also app, empty legs

The JetSmarter app offers over 2,500 empty-leg flights monthly. The annual fee is USD8,500. An average of 30% of all private jet flights fly empty, said the company, which typically saves between 15% and 25% off charter costs. “We project we will provide thousands of flights this year to new private jet travellers,” CEO Sergey Petrossov told CAPA, adding he already has 300,000 active users and a 10% monthly growth rate. “With half being new fliers, we believe this is the true democratisation of the private aviation industry.”

Petrossov indicated the next wave of private air travel within the next five or 10 years will be the ability to “hail” a small aircraft with six hours notice to go anywhere within a 500-mile radius for a nominal per-person fee which would be 70% off normal jet charter costs.

And investors seem interested - even though there will be successes and...others

These new companies don’t seem to lack for investors if the millions of dollars in equity and aircraft loans are any indication. Surf Air raised USD8 million in new equity and $65 million in loans for the 15 firm/50 options order for the single-engine, eight-passenger Pilatus PC-12 turboprop.

Before it launched operations in 2013, Wheels Up had the capital to order 35 King Aires, optioning another 70, and adding 10 firm Cessna Citations Excel and XLS in 2014. Jetsmarter reportedly earns $30 million annually doing just three to four bookings daily.

Clearly, the market is responding to these new business aviation models despite the higher costs. While many questions remain, one thing is clear, airline restructuring and technology have created a lot of opportunity and business aviation entrepreneurs are going after it.