Plane Conversations

Any number of b-school power plays will cite the competitive advantage necessary in hard economic times.  But how many people talk about the cooperative advantage?

Information is power

When the buyer has the same information as the seller, markets are more efficient.  The Internet has made information free and easy to transport.  So, understandably, any business that hopes to survive by restricting information will ultimately find competition from a start-up that does not.

The “equal information” playing field

This scenario plays out over and over as industries as diverse as newspapers to higher education to government to commercial aviation are forced into profound transformation by the availability of equal information.  True to conventional wisdom, good information creates more good information and bad information creates more bad information. For Social Flights, our best customer is the educated customer because they’ll educate each other.

Coming to an Airfield near you…

The true cost of flying private jets is one of the best-kept secrets in aviation.  Corporate Jets are a source of mystery, controversy, and symbolism. There are many reasons for suppressing true costs such as avoiding public disclosure of VIP expenditures,  or to protect profit margins enjoyed by charter brokers.

On the other hand, there are many important and legitimate reasons why some people should fly private instead of commercial. Social Flights believes that there are many situations where the true value of private flight greatly exceeds the cost of private flight for a large population of travelers. The problem is to find possibly millions of passengers who do not know that Social Flights applies to them.

Information Transparency

For this reason, it is essential that a baseline cost be established in a market so that everyone can use the same data to make educated decisions about how to travel efficiently.  It is essential that the market can eliminate price distortions, suppress arbitrage opportunities, and equalize asymmetric information.  The focus of the industry should be on expanding the market through transparency, not short term gain by hoarding the limited existing market.

Cooperation is the new market advantage

Social Flights has developed an instant flight quote feature that calculates a nominal estimate to fly a private aircraft from any airport in the US to any other airport in the US.  This establishes a baseline on the actual cost to fly.  From this baseline, jet operators can bid and win missions that are naturally most profitable to them. Or, operators can cooperate with each other by sharing legs in an abundant market rather than compete with each other for a constrained market.

Event planners, corporate executives, travel agents, economic development agencies, and travelers of every type now have the information that allows them to access private aviation inventory for businesses and the magnificent value that it brings to communities.  That is the new market advantage.

A strong Commercial Aviation Industry portends a strong private aviation industry.  This article features data from Honeywell Business jet forecast which correlates with the FAA forecast for 2011 through 2031 for commercial aviation.

Social Flights was launched at precisely the right time with up-to-the-minute social technology tools and business methods for aggregating large fleets of private aircraft and building out public charter routes that can meet customer needs.

According to Honeywell Aerospace’s Annual Business Outlook, business aviation is poised for recovery beginning in 2012.  The Honeywell forecast is based on surveys of more than 1,500 flight departments around the world.

The World According to FAA.gov

The carriers have stopped less profitable routes, retired older aircraft, and unbundled services while initiating new services that passengers were willing to pay for such as WiFi.  There is optimism in the industry that the next decade will show sustaining profits as the industry continues to grow in the long term.

The 2011 FAA forecast now calls for one billion passengers to be flown in 2021, two years earlier than projected in last year’s forecast.  Growth over the next five years will average 3.7 percent per year, with average annual growth of 2.5 percent per year for the remainder of the forecast period.  The level of activity and demand is expected to eclipse those published in last year’s FAA forecast. 

Some of the reasons include stronger than expected traffic and higher expectations of economic recovery.  As such, available seat miles (the benchmark for industry capacity) is expected to increase globally by 4.5% next year after years remaining flat or decreasing.  The global market is expected to increase at 3.1% through 2031.

In the domestic market, capacity grew 2.9 percent in 2011 and is expected to grow to 3.0% in the long term.  For the regional carriers, the domestic capacity will increase at 3.8% over 2010 rates.

The average size of domestic aircraft is expected to increase to 122.0 seats from just over 121.7 seats currently. The demand for 70-90 seat aircraft will continue to grow.  The FAA expects the number of 50 seat aircraft to fall (and many will become available for lease or purchase).  The average regional jet size will increase to 54.6 seats while the average length of the trip will increase.

The profitability of all air carriers will depend on stable fuel prices, increase in demand for business travelers, and the willingness of travelers to continue to accept higher prices for less services.  In order to keep costs low, the carriers will need to better match their routes, aircraft capacity, and their markets (supply and demand).  they will need to ground older aircraft, drop low margin routes, and pressure regional carriers to accept lower fees.

 This is where social flights comes in:

All this is bad news for 6-60 passenger scheduled service. However, Social Flights can effectively join these two forecasts by providing public charter services across industries.  The weakness of one mode can be hedged by the strength of the other, and vice versa.  This makes for an excellent investment opportunity in social organization methods for air transportation pioneered by Social Flights.

There is an entire segment where Social Flights can capture market share that commercial carriers would willingly cede to Social Flights in order to keep THEIR own costs low.

The Federal Aviation Administration is more than just a dour old government bureaucracy.  The FAA also collects and publishes very important information.

This chart tells a very important story.  It says that the economy depends on aviation as much (if not more) than aviation depends on the economy.  So when Social Flights talks about private jets, it’s a whole lot more than wealthy people keeping their shoes on. Private aviation is in fact an important conduit for economic growth.  The way that we organize aviation assets such as aircraft, operators, airports, and support services can have a profound impact on a region.

For all economic development professionals:

These statistics should be stark.  If your community has air service, then the products and services that your community can trade will be 69 times higher in value than ground transportation such as trucking routes.   Yet many economic development reports treat these two modes roughly equal.

Furthermore, the market is huge; 1/2 Trillion dollars worth of products are flying over your head and 1/4 Trillion dollars worth of direct expenditure is looking down at you through an impenetrable window – EVERY YEAR.  And, that’s just the tangible value. Ideas, knowledge, wisdom, trust, influence, and experience are all extremely expensive to create on your own or by trial and error.  Yet this value is readily stored and transported in the cabins of aircraft.  This intangible value far out-weighs anything that can be carried in a truck.

What is truly surprising is that it only requires 2 million people to keep 2 trillion dollars worth of value aloft.  As such, every job that an economic development office creates in aviation, can potentially return 500,000 – 1,000,000 dollars in value to a community.  If a community is going to “buy jobs” with their taxes, they should buy aviation jobs.

Likewise, it would NOT be wise to lose control of this valuable resource to the whims of the airlines or outside corporate charter – their bottom line is not the same as yours.

Social Flights now brings a complete aviation solution to your community.  Our CASP (Community Air Service Program) can provide a community with modern aircraft, operational knowledge, and certification authority to operate your own public charter airline.  The connection is clear – airplanes equal money.  Give us a call, let us design your community air service program to integrate with your hotels, restaurants, tourism board, artistic community, and industries.

After all, that is what community is all about.