SATS Air Suspends Operations
It Was Such a Great Idea! What Happened?
SATSair
Of all the startups of air taxi / charter companies from the past few years, I would have given SATS Air the best chance to succeed. Being in the FBO (private aviation terminal) business at two airports, I have seen their aircraft come in on numerous occasions. I met a couple of their pilots in the lobby of our operation who were very professional and customer service oriented. They had a great idea. They had the support of Cirrus with new aircraft in a market niche that no one else was filling.
Quoting the article in Flightglobal.com, “Arguably the most successful single-engine aircraft air taxi company in the US, SATSair had in the past five years built a fleet of 26 Cirrus SR22 aircraft that accumulated 60,000 flight hours and 13 million revenue seat miles.” That is impressive for a single engine air taxi company.
George Larson’s article in Aviation Week quotes SATS Air President and CEO Stephan Hanvey ”We know our business model works,” Hanvey insisted. George Larson goes on to say in his article: Although he declined to go into the reasons for the apparent temporary halt in the company’s “air cab” operations, he acknowledged that the decline in the U.S. national economy has undoubtedly played a role. The timing of the announcement suggested that the decision was based on an eleventh-hour development.
SATS Air paved the way for a new user of aircraft charter or air taxi service. Their pricing and point-to-point service was competitive and efficient for travelers moving from small markets to other small and medium travel markets. They broke the barrier by proving that travelers were willing to fly on a single engine propeller aircraft in the name of efficiency and time savings. A few years ago when SATS Air was just getting into the market, I spoke with one of our regular charter customers who chartered our Lear 45. He was always adamant about flying on a newer aircraft and would not charter our Lear 35 aircraft because they were “older”. Even he told me in that conversation that he had tried SATS Air and loved the service. He was the proof that some travelers will get on a small single engine aircraft if it is new even though he would not ride on an older Lear. I haven’t forgotten that lesson.
So what happened? It is too early to tell and without access to information from an insider perspective we may not ever know.
Having fought this economy for the last 18 months, I will not be a Sunday afternoon armchair quarterback and criticize the management of SATS Air. Besides, as John Donne noted, what diminishes one of us, diminishes us all.
It is a tough market and everyone in our industry has taken a beating – some more than others. It is the most challenging time I have seen in all of the 27 years I have been doing this.
What I do know about how business works in this country is that best innovation can happen in the most challenging of times. When pressed hard, we come up with new and better ways to do what we do. In business and general aviation, what we provide is a time saving machine – the private aircraft. What seems to be the limiting factor for our success is our current inability to efficiently lower costs to get the supply of private jet travel services to the market in a profitable way. I am confident that there is a solution out there, we just have to find it.
Good article and I agree you cant armchair quaterback the managment. Many larger comapanies than SatsAir are also suffering, but I do see some obvious things that seem to plague this industry….
The first thing is the lack of working captital. Many companies start with big cash reserves then burn through them VERY quickly. Seems to be an occupational hazard in aviation start ups and companies. They go like gangbusters for a year or two then they run out of cash. This is usally do to the lack of new investors willing to put up the cash for a company that hasnt shown a profit….yet. Many venture capitalists and others with money are simply not going to wait for their returns. On top of that, you know have a small and medium business credit crisis so when these companies start running short of cash as they expand, they have no new access to capital or credit and the company quickly grinds to a halt. This is how my last employer folded. They simply could not get credit. Until that situation is rectified, its going to be hard for even good business models to flourish.
The other thing is excessive expansion. DayJet would be a good example, they had the cash, but got to big, to fast. It simply is too big a drain on resources with overhead from aircraft, labor, maintenance. If business dosent grow as quick as you would like or with the recent slowdown in aviation. These companies are going to have to shrink incredibly fast or cease to exist. I believe a much more prudent business model is a “slow growth” model like the one SouthWest has used. You start small and move into underserved markets carefully and with a lot of research. This way you dont get ahead of your business model. It also prevents you from buying or leasing too many aircraft and the overhead costs that it entails.
I STILL believe the air taxi model can work and that people will use it. It might be Cirrus, or it might be another prop or light jet manufacturer in the future, but I dont think we will see a large Air Taxi startup in the near future with the credit issues.
Small, slow and steady is the new way to go.