World Airways Update

Transcript

Adam Weiss:So there's really 3 components to World Airways. We are a contextually digital airline focused on the consumer experience, the passenger journey from the time they're booking to the time they land. We want to be there for the passenger to provide them products, what they want, at the times they want them, at all points during their journey. Our second part of our thesis is really being opportunistic about our route network and equipment that we use. We recognize that there are some underserved markets in the— particularly in the US with latent demographics that haven't been activated. And being an ultra-low-cost US flag carrier, we think that we have the opportunity to provide connectivity and access to parts of the world where people previously didn't fly to, US citizens. And third, there's a strategic marketing and social element to our airline. We think that for the longest period of time, Airlines haven't marketed to their customers in ways that really resonated, particularly with emerging millennials and the generation behind them. We're looking at unique and creative ways of engaging our potential customers. So we have a private equity backer in Miami that's never ventured into aviation before. Part of our board previously participated in the launch and relaunch of Eastern Airlines and the relaunch of Pan Am, as well as a few other projects over the history of their investments. So we do have some aviation insight, but most of us come from an external perspective, and we think that's a good and a bad thing. We have some gray hairs that are operationally providing us acumen, but we also have a fresh external perspective that we think differentiates us and allows us to ideate in ways that haven't previously been done. World, really, to us, it represents global connectivity, which we think we provide a large segment of the population that hasn't previously been able to access other parts of the world. You look at a lot of Americans, they don't think to travel internationally. They— America is— North America represents almost half of the profitability in airlines over the past year, but a lot of that is just domestic travel. Americans instinctually don't think to travel internationally, and we think our name sort of evokes the aspiration of travel, which is really a redeemable aspiration, and we're using our name to sort of market to those passengers, to activate them and sort of message to them that they can see other parts of the world they haven't previously been to. So we're in the process of certification, we're in the process of selecting our systems, our rebranding is almost complete. We've invested a significant amount of time and resources into creating a brand, creating messaging. We have an external consulting group that's almost internal at this point that's led most of those processes. We're still finalizing our route network and our equipment selection, but all those processes are occurring concurrently, and we're on schedule to go commercial scheduled service in Q1 of 2019. 787s are our target equipment, but we recognize that creating economies of scale are easier— it's an easier venture using equipment that's cheaper. 787s, the unit economic cost of a 787 is prohibitive for a startup. As you can see with Norwegian's struggles, it's almost 3 times the price to fly a 787 from London to Boston as it's projected to be to fly a 321LR. So as I said on the outset, we're trying to be really thoughtful about our equipment selection. Ultimately, we want to migrate most of the fleet to the 787. We anticipate having 20 or so planes within 5 years. 787, the -8 or -9, would probably comprise most of them, but we're not set on any equipment yet. We're looking at different options and really want to be smart and thoughtful about the selections that we make. To start, probably 2, and then scale to 5 within a year. Probably the A320s. We haven't identified anything specifically yet, but to us that's the best entry point into the market. So the A320 would obviously be appropriate for certain theaters. We're looking at secondary and tertiary markets in the US to go to Europe potentially and South America. The A330, obviously we need to go to Asia at the outset, obviously migrate to 787s after that. But really, we haven't crystallized where we're flying yet. We haven't finalized our network planning, but we are looking everywhere, essentially Europe, deep South America, and Asia. It's secondary to primary, most likely. Again, it's really a function of unit economics. It's expensive, more expensive to fly out of LAX than it is to fly out of Las Vegas or Portland or Seattle. So we need, we need, we need it to make sense. We come from a private equity background where we model everything and we're— it's going to be important to us that we are financially viable in the near term and in the long term. So to answer your question, I would say if we fly to Europe, secondary markets and tertiary markets to Europe, to secondary markets in Europe, To Asia, probably secondary markets or primary markets to primary markets in Asia, and South America, secondary, primary to primary. Transatlantic's become penetrated but not to secondary airports, so a lot of the traffic is going transatlantic to New York, not to the Midwest, not to areas of the South, and population centers where a lot of the consolidation occurred and the Big 3 left. Those markets. There's opportunity there. So we see opportunity going from transatlantic to secondary and tertiary markets. I would agree with you in saying that there's opportunity in Deep South and APAC, certainly. And there's— the South American market's interesting in that there's a lot of other considerations politically, Economically, with Brazil's emerging economy, with Argentina historically being difficult and now sort of relaxing their amenability to carriers, foreign carriers coming in. Chile has seen recent interest. So I think there's opportunity everywhere. It's really a matter of just identifying it. Markets are becoming increasingly saturated. The secondary markets are becoming more normalized and more mainstream, and a lot of times they become primary markets, but there's plenty of places to fly where people are that want to fly internationally and that haven't. So we'll probably have— it'll be economy and maybe a premium economy, 2 classes to start. We recognize the importance of the business traveler. And we need to differentiate to some extent in order to engage them. The business traveler I refer to obviously is the small and medium business traveler. It just doesn't make sense for them to pay $10,000, $15,000 to fly to Asia or to Europe when they have the opportunity to do so for cheaper. We think that's a really emerging demographic and we need to cater to them, so we're going to have to differentiate in class. To some extent, C-Pitch to some extent, but will primarily be economy. We recognize feed is essential for us. We need it on both ends, and that's what AirBlox provides. They give us the opportunity to form— to gain access to the value alliance in Asia, if that's where we choose to fly. They give us the platform to form other JVs around the world, and we think that as some of these JVs emerge, there'll be sort of disenfranchised airlines that need partnerships, and AirBlackBox gives us that opportunity. From an e-commerce perspective, it was an easy choice. That's a huge part of our business model, and their platform allows us to do things in digital and e-commerce that traditional PSSs don't. So working with them really is important for us to do what we say we're going to do. A lot of Airlines pay lip service to buzzwords digital and data-driven, but AirBlocks Box is sort of our vehicle to ensure that we execute upon that.

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