Plane Conversations

This is déjà vu all over again.  By now I would have thought our Congress would have come up with a long term funding authorization for a very critical part of our nation’s infrastructure.  All of us under the big umbrella of aviation (airlines and GA) don’t agree all of the time but for once we all agree to the necessity of funding the FAA and the development of airports and Next Gen air traffic control systems.  We have even accepted the idea that fuel taxes will go up to help fund these initiatives.

ATW online reports that our Congress just passed the 20^th short term extension for funding the FAA.  That’s right, 20 extensions.  If I ran my business finances like that I would have been fired a long time ago.  Somehow our nation’s lawmakers can’t agree to get anything done about this yet no one seems to hold them accountable.

Quoting from the article “FAA Administrator Randy Babbitt, Airports Council International-North America and airport directors around the US have been saying for some time that uncertainty over FAA funding, particularly the Airport Improvement Program that helps finance expansion programs, is causing disruptions to airport construction projects (ATW’s Airports Today, Oct. 5, 2010). “For over three-and-a-half years we’ve been operating on extensions,” Babbitt noted during a recent speech. “It’s been very difficult to run an agency on extensions … We need to restore long-term stability to funding.”

In addition to the disruption of airport construction projects and the stall in developing Next Gen, the FAA has basically shut down the certification of new Airlines and Charter operators. So how do we create any new jobs in our industry if startups can’t start? Those of us already flying are also having trouble getting anything done with an agency that doesn’t know where their next dollar is coming from.

The Democratic controlled Senate and the Republican controlled House can’t seem to figure this out. But this goes back to before the Republicans got control of the house. So it seems that doing nothing about an important issue is the way it goes these days in Washington DC.

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Over the past few months as I have talked both online and offline to people about Social Flights, a question has been raised about the impact of the Social Flights business model on the security of private aviation flights. A recent tweet from @tinsko started a dialogue via twitter about this issue that prompted me to write more on this issue from my perspective as an operator of charter aircraft.

In private aviation, whether operating charter flights, running a corporate flight department or flying your own aircraft, the reality of security is that we know who is on our flight. For starters, on a small aircraft carrying 4 to 12 people it would be strange to be sitting on a flight with someone you did not know, or at least know why they were on the flight. I think all of us who have experienced flying this way can say we have never been on an aircraft when we did not know who was on our flight and why they were on it.

There are ways that we as a charter operator comply with security, such as checking passengers against the no fly list and training of our employees to identify potential threats. These are all good security filters to prevent boarding a passenger who could be a threat.

What most of us will say, however, is that the best security measure is to know your passengers on a more personal level.

When I board an airline flight, most of the time I don’t know anyone else on the flight, unless I am traveling with others from my company or family members. What I do assume is that we have all gone through security screening and no fly lists, so that by the time we get on the aircraft the risk has been mitigated to an acceptable level.  All of this screening does not prevent the occasional passenger going nuts on the flight and trying something crazy. We have seen these stories lately.  Fortunately, the most anyone has succeeded at doing is getting thrown off the flight and met at the gate by law enforcement.

Back to charter flights. As our business model for Social Flights develops, people will self-aggregate around travel intentions and charter flights. They will board a small jet together and go to a common destination. Before that flight they may not have met each other in person, but I am convinced they will know more about each other than they know about the person they share space with on an airline flight.

With the explosion of social technology in the past seven years, most of us now know so much more about the rest of us than we ever have before. We all have put ourselves out there on Facebook, Linked In and Twitter and we have a history of interaction with each other. A history that says way more about who are than a security screening or a government list.

So before I share a Social Flights ride with you I will know a lot about who you are, who your friends are, who your business associates are, and what you have been up to recently. And based on that knowledge I can make some pretty good assumptions about what level of threat you might impose on me and our fellow passengers when we fly together.

Nothing is completely fail safe and our society can never completely protect ourselves from bad actors who are intent on harming us. But our intelligence agencies have proven that good information is the best basis for preventing acts of terrorism.  

I would propose that getting to know each other before we share a ride on a jet might be one of the best security measures we could use. It has never been easier to develop that trust than it is today with the advent of social technology.

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Maybe the bigger question to ask is: Will social technology change the way people do business?

Over the past two months I, along with the rest of the world, watched the events unfold in Tunisia and Egypt which resulted in the toppling of decades old repressive regimes. Then the outbreak for freedom spread to other countries in the Middle East  and Libya , and is even trying to gain a toe hold in China. Governments can shut down the internet for a time, but eventually people will figure a way around the firewall. I thought about the part social media played in these events and the discussions in mainstream media about what social media has done in these countries to fuel the protests.

Social media and the technology behind it are not inherently good or bad and do not have any power on their own to do anything. The technology is just another means of communicating. What Social Media has done is enable the world to connect and communicate in ways, and at a speed and distance, never before seen in human history. And right now it is in it’s infancy.

As a student of social media and how it might be used in business and private aviation to change the ways we do business for the positive, I have been met with skepticism as I talk and write about it.

Questions and Comments include:

• Nobody on Facebook will book a charter flight or buy an aircraft
• The affluent (our current clients) don’t use Social Media
• Social Media is some kind of fad and won’t last
• Those who use Facebook only communicate silly chatter about what they had for breakfast and where they went the night before
• I don’t want anything to do with this social media stuff, it is a waste of time
• How do you monetize this stuff and what is your ROI?

Back to Egypt and Tunisia:

History will show that the power of the people to communicate with each other was the undoing of repression. The worry now is that another repressive regime will fill the void as so often has happened in Africa. Somehow this time, I don’t believe the people will allow that to happen. Now that the people have won, who in Egypt or Tunisia will be able to lead the country and not allow the people to communicate online? Another demonstration can happen in an instant. Once freed, people will not go back willingly to being repressed.

So if the power of this communication on steroids called Social Media can topple governments, does its use also have the potential to open up markets and change the way people buy goods and services? I think the answer is that it’s already happening. And it will pick up speed just as the development of the technology has picked up speed.

People, given the tools to communicate unfiltered across borders, cultures and any other boundaries, will drive solutions to market problems that have been begging to be solved.

The air transportation system in this country has major efficiency problems that cannot be solved by the government or the airlines overnight. Our government can’t even agree on a funding solution to update the 1960’s generation air traffic control system, much less solve a market problem.

So if the government can’t solve the problem of inefficient air travel who can? How about we the people, through communication which creates new knowledge and creates innovation and brings new solutions.

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A LA Times article by Hugo Martín discusses what those who travel on the airline have experienced in the past year and it looks like we can expect more of the same in 2011.

Passenger demand has returned with the upturn in the economy and airlines have limited their growth in inventory (seats) in order to make a profit by increasing their yield per flight. Less empty seats means more control over pricing and greater yields per flight. Simple supply and demand economics.

That’s all great if you are on the selling side of that equation. If you are on the buying side it increases the likelihood that you will get bumped off a flight. When a flight cancels your next flight out may be the next day, not a few hours later, because that next flight in a few hours is already sold out.

Load factors in this article for Delta and United are running at around 84%. Load factors at that level mean a lot of flights are full at peak times and many are oversold. I don’t mind a full flight if you just get me home on time and don’t lose my stuff. I do mind it when you cancel the flight and tell me you will get me home the next day.

The LA Times article posts some interesting comments from a survey by Zagat of 8000 frequent fliers:

* The only thing missing is a blindfold and a cigarette.

* My bags get better service, but they pay extra.

* The only difference between economy and business classes is a shrimp on your salad.

* “Unwelcome aboard!”

* I don’t love getting up-close-and-personal with the head of the person in front of me.

* Who made them mad at their customers?

* Entree selections should be labeled “choose your poison.”

* When two crummy medium-size airlines merge, all you get is a crummy large airline.

* Seats make an iron maiden seem comfortable.

Business Aviation continues to have unprecedented opportunities to meet the market of frustrated travelers with a better proposition. As airlines turn into mass transit systems that sell a commodity (seats) are there still people willing to pay for service? More importantly can business aviation save time over airline travel and do people value their time more or less in today’s economy?

I think I know the answer but from my viewpoint I am biased. If the airlines just got me there on time I think I could tolerate the rest. But when I don’t get there on time then all of the service failings start to really get to me. Too much time in a crowded terminal waiting on that “next flight” is not good for travelers to reflect on the experience

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An industry in crisis is an industry ripe for transformation.

America’s air travel system is in crisis. In response to rising fuel prices, air-space congestion and industry losses during the recession, airlines have cut capacity and raised rates. These challenges follow on the heels of delays and hassles that have cost the nation almost $33 billion in the past year alone, according to a recent study commissioned by the FAA / DOT.

Some blame the problems on government regulations over airlines and the lack of modernized air traffic control infrastucture. Others see the problem as dysfunctional management of the airline system.

Could it be that “the system of air travel” is being re-engineered before our eyes and all the current problems are part of the process?

I remember when airline travel used to be a social experience. Today it is anything but social, with the majority of passengers frustrated by the experience and loss of productivity.  Yet air travel is necessary for both leisure and business purposes.

How big is air travel and its impact on the economy here in the US?

Research from the US Travel Association says:

1. About 42 percent of U.S. adults reported traveling by air for leisure trips.  The percentage of air travelers increases to 48 percent among U.S. adults who traveled for business purposes in the past year.
2. A study by the U.S. Travel Association revealed a deep frustration among air travelers that caused them to avoid an estimated 41 million trips over the past 12 months at a cost of more than $26 billion to the U.S. economy.
3. Business travel in the U.S. is responsible for $246 billion in spending and 2.3 million American jobs; $100 billion of this spending and 1 million American jobs are linked directly to meetings and events. For every dollar invested in business travel, businesses experience an average $12.50 in increased revenue and $3.80 in new profits.
4. The Internet was used by approximately 90 million American adults to plan travel during the past year with 76 percent of online travelers planning leisure trips online.

The Social Market of Travel Is Hot Every other day or two, you hear about a new travel app, a travel related company, or a mega travel player partnering, acquiring, or developing the next industry killer app. Consider some of the recent developments in the travel space over the last year:

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Many of us who work in business aviation wonder if people would be willing to share their travel plans, share a flight together, let others know what they are up to, so they can meet up on trips, share rides from the airport to the hotel and so forth.

In other words, will business aviation travel go social?

One of the terms used for the aircraft we operate is “private” which does not exactly line up with “social” in a public sense.  We fly “private jets.” Private sounds like I don’t want the public to know what I am doing, where I am going and I most likely do not want to share my private ride.

Sharing is already happening in the world of airline travel and the events that drive travel; maybe to ease the pain inflicted on travelers by the airline system.

As I have looked around on the internet for social media platforms related to travel some really interesting ones have started showing up.

• Planely (www.planely.com) allows airline travelers to share their flight itinerary with the hope of connecting with others on the same flight. If this builds critical mass it could become a valuable tool.
• IMGuest (www.imguest.com) allows travelers to share their hotel location and plans in order to meet up face to face with others at the same or close by hotels, and expand their network.
• Plancast (www.plancast.com) is a site that is really done well, allowing people to post their plans for attending conventions, local events, music events, etc. and easily see who else is attending. A great way to make connections both locally and at away events.
• TripIt (www.tripit.com), which just announced its acquisition by Concur (Nasdaq: CNQR), was one of the first travel sites allowing travelers to share their itineraries that gained a mass adoption. Concur is a leading provider of integrated travel and expense management solutions and apparently thinks TripIt is on to something based on the acquisition price.

These sites allow you to sign up and use them for free, and in some cases check in through your Facebook or Twitter accounts. The Facebook check-in creates an instant profile for fellow travelers to see plus it gives the site access to your Facebook information.

So the question asked again: Are travelers willing to share their travel plans in the hope of making the experience more social? The answer seems to be yes, as travelers are signing up to these social technology platforms in droves.

What about personal and business travel in private chartered aircraft?

What is the value in sharing travel plans with others you don’t know too well? Is it too risky?  Most of these sites tout the value proposition of networking and meeting up with people you would not otherwise meet.

The value of each of us knowing where others are going can go beyond just networking.

If you and I find out we are going to the same places, we can get together and come up with new solutions for getting there more efficiently by sharing costs and buying travel collaboratively. Eventually we may even be able to drive the market to offer better solutions that fit our needs, versus what suppliers of air mass transportation offer us today.

It would great if we could go when and where we really want to go in the most efficient manner as opposed to being pushed and shoved through a system that is not designed to really meet our intentions.

When that happens can the private aircraft, and the industry that supports it, be a possible solution?

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A January 17 press release from Embraer announces that Embraer delivered 100 Phenom deliveries in 2010 making it number one in most deliveries. That’s pretty impressive for a new aircraft that was only certified at the end of 2008, and especially taking into consideration the economy.

An excerpt from the press release:

One hundred aircraft delivered: more than any other business jet in the world.

São José dos Campos, January 17, 2011 – Embraer’s Phenom 100 entry-level executive jet was number one, with 100 deliveries in 2010. Together with the other airplanes of Embraer Executive Jets’ portfolio, the Phenom 100’s success is also reflected in the Company’s increasing market share, which is the fastest growing in business aviation in terms of units delivered.

“Its clean-sheet design, superior cabin comfort, amazing performance, low operating cost, as well as the jet’s great looks, have thrilled our customers,” said Luís Carlos Affonso, Embraer Executive Vice President, Executive Jets. “We are honored and thankful to our customers for their choice and confidence in the Phenom program and in the Embraer brand.”

Our delivery group at JetQuik, led by Bill Minkoff, has delivered 16 Phenom 100 and  2 Phenom 300 aircraft to customers in the US and Europe since October 2009. The acceptance and deliver process gets smoother with each delivery. Embraer is building great aircraft.

We are proud to be managing and operating two Phenom 100’s in charter service. They have gained good market acceptance with our charter passengers and are proving themselves as they get time in service.

Congratulations to Embraer for making a great entry level business jet.  I look forward to seeing the Legacy 450 and 500 aircraft when they reach certification and production.

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Part 2: Looking to 2011 and Beyond

Where does the general aviation industry go from here? Well, this looks to be a year of transition, from the old economy that we knew prior to 2008 to the new economy that should start to really see growth in 2012. Growth will come with a different look than it has in the past, driven by technology innovation in the market and increased globalization. The United States will no longer be alone in the drivers seat. Traditional market general aviation growth will happen in China, India and other developing economies.

Growth here in the U.S. has to come from market innovation. We need to do more than get used to it. We need to adapt and embrace it, and determine where the opportunities are for those of us in general aviation in the U.S. and in Europe.

Our company finished 2010 with a strong run to the end of December, and the first few months of 2011 look strong in aircraft charter and FBO fuel sales. Is this a sustainable trend? I hope so. My major concern is the volatility of fuel prices. We don’t know if the economy, let alone the aviation industry, can stand oil prices 30% to 50% higher than they are today.

Setting concerns aside, when I look out to 2011 and beyond, I see opportunities for general aviation to capture the traveler in a new way. The number one reason more people don’t fly general aviation aircraft is price. I have written a lot about this over the past 18 months. I’ve thought about this problem (opportunity) for many years prior, as I talk with people who use or want to use our service almost every day for the past 28 years. There are some ideas worth considering in a good book I’m reading right now called “What’s Mine is Yours: The Rise of Collaborative Consumption” by Rachel Botsman and Roo Rogers.

Wikipedia says the following about this term I had not heard of until recently:

The term collaborative consumption is used to describe the cultural and economic force away from ‘hyper-consumption’ to re-invented economic models of sharing, swapping, bartering, trading or renting that have been enabled by advances in social media and peer-to-peer online platforms

The authors propose that in order for “Collaborative Consumption” to work, four underlying principles must be present:

* Critical Mass
* Idling Capacity
* Belief in the Commons
* Trust Between Strangers

Conditions one and two definitely exist in General Aviation and the subset of Business Aviation. We sit on a fleet of underutilized aircraft (idling capacity) , many parked and not flying at all, and even the active aircraft are not used anywhere near optimum levels. Critical mass is present but not properly managed and accounted for. In the U.S. there are 17,000 aircraft available for hire in charter service. Many more aircraft could be available if demand was sufficient to put them to work. Where are they and how do they work together as a synergistic fleet to serve the market? Today the fleet doesn’t work in a synergistic way.

The charter industry is fragmented and not optimized, but technology companies like Charter X / Avinode are making strides in providing a global distribution system for supply of aircraft availability across the fleet. The bigger problem seems to be finding the customer.

That customer is currently being pushed and shoved around by the airlines in a system that seems to become profitable only at the expense of efficiency, comfort and happiness of the traveler (the customer).  If Zappos is in the business of delivering happiness I sometimes wonder if the airline system is in the business of delivering misery.

On conditions three and four, we don’t know if there is a belief in the commons and trust between strangers in General Aviation. Are we willing to share a ride or flight, and do we trust who we are sharing with to sit next to them? The defining technology that will push us through these hurdles will be social media. I can see a day when we share a flight with others to a destination of common interest and long before we board the aircraft we know who we are flying with because we know them online. We see their Facebook profile and we are connected to them on LinkedIn. We have tweeted and texted them and maybe even used email (outdated) to connect to them, to discuss our common travel intentions.

And so our belief in the commons and trust between strangers centers on sharing a flight in a private aircraft together to safely and efficiently travel. And more than that, it will be enjoyable travel because the travel itself will have a social component to it that we don’t get when we travel on the airlines today. Traveling with old and newfound friends and business associates and family will be the new order of travel.

This is not going to happen on a large scale in 2011, but it will begin this year. By 2015 it will absolutely change travel by air in ways that most people cannot even imagine today.

Early adopters from the supply side will be those charter companies (new and established) who are not afraid to adopt new technologies and business processes to meet the new economy. As the critical mass increases and more travelers find this way of air travel, more suppliers will fill the demand.

From the demand side, those who are fed up with the current system of air travel are hungry, maybe even begging for a better solution to meet their need to travel. Social technology may discover that demand for what we have to offer far outpaces our ability to meet it with the supply where it sits today.

Eventually the airlines will have to reorder their business model when they discover that travelers don’t want to go when and where they are being forced to through the current system. It will take them a while to realize what is happening and some airlines that do understand innovation will figure it out. Many will not, due to their inflexible business models.

The next few years will be an exciting time in our industry as disruptive technology changes the way we travel. I look forward to seeing it happen and hopefully being in the midst of it.

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Part 1

I read a lot and try to keep up with what is going on in our industry, trends, innovations, economic forecasts for aviation and the economy on a macro level, what and how the airlines are doing, and so forth.

However, my best perspective about Business and General Aviation still comes from where I sit working in the middle of a business that charters, manages, sells, maintains, fuels and stores aircraft. We also partner on two flight schools that do primary and advanced flight training. I am surrounded by and involved with just about every aspect of general aviation.

2010 was a year that started out with no clear understanding of whether it would be the year of recovery or a repeat of 2009.

The first 8 months of the year were up and down on monthly revenue in charter. Some months looked great and some looked like 2009. It is hard to run a business without predictability in revenue and activity. How do you staff for that and plan cash flow? We managed to hang on.

We have been very fortunate to have a maintenance division of the company that never slowed down during the recession due to the type of maintenance we specialize in. We perform work on and refurbish small regional airline aircraft and the demand for these aircraft worldwide didn’t change much during the recession. Small airlines around the world and the communities they serve need aircraft. Aviation in many countries is not so much a luxury but more of a necessity of travel with poor road infrastructure. The weakness in the small regional airline market seemed to be more the lack of financing than lack of demand.

Our FBO’s showed steady improvement this year over last year. Fuel sales volume was still not at 2007 levels but it got closer. I like upward trends more than downward trends.

The good news really happened in the last 4 months of this year. The phones started ringing more and our charter flights picked up tremendously. As I reviewed it yesterday, and compared to the last 4 months of 2009, I almost couldn’t believe the numbers. Our revenue in charter was up 65% over last year from September through December.

What happened to cause this increase?

A few things on our end helped, including an increase in the size of the charter fleet with 8 new aircraft additions over the past 12 months. Included in that mix was a 30-seat turboprop that met a void in the market. Without too much marketing effort this aircraft started flying immediately when it went into service at midyear.

Looking at the external factors, the airlines and the system they operate in continued to add frustration and inefficiency to air travel. More TSA hassles, more delays and cancellations added to the misery factor. Reduced seats and increased demand created profit for the airlines but caused trouble for the business traveler. Full flights don’t allow much flexibility when cancellations happen due to weather or maintenance. It is not so easy anymore to rebook on the flight leaving two hours later. Sometimes that turns into “we will get you there tomorrow”.

Demand for travel has come back but the friction in the system has gotten worse.

That is good for those of us who are in the business of offering alternatives to scheduled airline travel.

So my guess is that we also benefited from the economy and the airline system. I will take the gift the airlines are handing us and smile.

The snowstorm in the Northeast this week generated a lot of year-end flight activity for us. Stranded vacationers were willing to charter flights to get where they needed to go.

So this year ended up a whole lot better than it started, and I am encouraged that the opportunities for our company and for our industry are going to improve in 2011.

Even in a shaky and uncertain economy people still need to travel. Businesses have proven their resilience to keep doing business and make things work even when the forecasts from some are doom and gloom. Face to face business has yet to be replaced totally by the videoconference. I still can’t share a meal with you through the video screen.

I believe we have amazing opportunities as an industry to improve the efficiency of businesses by saving time and stress on their most valuable asset – their people.

From my perspective I will take 2010 as a year of learning to adapt and innovate and treading water without sinking.

In the next posting I will throw out some ideas and thoughts about what 2011 and forward could look like.

Happy New Year

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When you and I visited last, Leon and I were at Wal-Mart buying emergency clothes and supplies since our bags were lost. I honestly thought (hoped) that would be the end of the trip drama.

Later that day, our bags showed up on the doorstep where we were staying; so, we finally had our stuff.

Tuesday night’s business dinner went late; and, we had a Wednesday morning meeting before we would leave Danbury to drive to White Plains (HPN) to catch our 11:30 departure for home.  That was the plan, anyway.

Wednesday morning there was a voice message on Leon’s cell phone notifying us the 11:30 am flight out of HPN had been canceled and that we had been rebooked on a 6:05am flight. The message was sent sometime Tuesday night while we were at dinner; but. we did not get the message. He received a text message at 6:10am saying that we were booked on the 6:05am flight (you know, the one that left five minutes ago?). For us to have made that flight, we would have had to have left Danbury about 4:15 am Wednesday morning, missing our Wednesday morning meeting completely.

After calling the help desk at Delta, we were able to get a flight out of La Guardia at 3:30pm, going non-stop to Nashville.

This wasn’t toobad since it gave us a little more time for business at Danbury.  Great.  So, we left Danbury around noon for the hour and a half drive to New York’s La Guardia airport. When we were within sight of the terminal building, I got a computer call from Delta notifying us that our 3:30pm flight had been canceled due to weather in Nashville and that we had been rebooked on a Thursday morning flight departing at  8:10am.  You’re kidding me, right?

Trying to figure out how to reduce the costs of this change, we returned the rental car, checked into an airport hotel and the day was over.

Delta had canceled all flights Wednesday afternoon into Nashville (BNA) due to forecasted surface icing conditions. I appreciate the seriousness of freezing rain and what it does to an aircraft; but, interestingly, Southwest and other carriers continued to fly into BNA all Wednesday afternoon and evening.

I wonder if the cancellations had anything to do with the “passenger bill of rights” and the new penalties for people who are left stranded on aircraft or in terminals. Maybe not, but the cancellation of that many flights for a chance of bad weather seems like a very aggressive cancellation policy.

Our next trip to Danbury will be in a Cirrus SR-22 or on Southwest to Hartford, Connecticut’s Bradley / Windsor Locks Airport if the weather is too bad for the Cirrus. No more La Guardia. How much productivity is lost by traveling in this system? The FAA study says about $33 billion per year in lost time. I don’t know exactly how they came up with that number; but, I would dare say that they have not even scratched the surface of true losses since they have no way today to measure the wear and tear on the human mind and body from traveling through the airline system.   

Bottom line: The trip home got us back to Nashville one day late with travel time Danbury to home base at Smyrna was 22 hours. I think that got us down to about 45 mph average trip speed.  In the 1930’s, Delta Air Lines advertised “Speed, Comfort and Convenience.”  Not so much.

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