Plane Conversations

Paraphrased from an excellent article in the Wichita Business Journal by Emily Behlmann:

With all the attention social media is getting these days, (the results) of a recent survey shows that 45 percent said social media was a low priority.  Deanna Harms, executive vice president at the Greteman Group , a Wichita branding agency who lists aviation brands to be a specialty, says business aviation companies, some of the most major brands in Wichita, have hung back on [Social Media] even more than other B2B firms.

Harms says she thinks one reason could be related to recent criticism of business jets as unnecessary luxuries. “Even in newsletters, it’s difficult to get aircraft owners to agree to being profiled,” Harms says. “You’ve heard the campaign ‘No plane. No gain.’ Aircraft owners, unfortunately, often think, ‘No ink. No criticism.’ The minute you start talking about your use of business aviation, the naysayers attack.”

Let’s rethink this:

Social Flights uses social media tools to fill empty legs and sell primary charter “by the seat”.  We also provide limited calendar air service (FAA Part 380 Public Charter).  In addition to marketing, we use these tools to aggregate private airplane operators and their inventory so we can “systemize” a large virtual fleet.

These innovations are a far cry from the domain of the demonized elitist corporate jet owner.  In fact, we are hearing from dozens of small communities who are functionally stranded without access to commercial aviation with very few other practical travel modes. Communities passionately ask us for air- service into a hub like Atlanta instead of bouncing around several regional airports and enduring a 3-hour drive to anywhere.  Millions of American need access to each other and global markets beyond their parochial economies.  People need opportunities – that’s what social media is all about.

You can’t Globalize until you Regionalize

Regionalization is where small communities want direct service to other small communities.  Social Flights is introducing air service between Branson MO, Nashville, Tri-cities TN,  Austin, and Milwaukee. It almost takes less time to drive between some of these places than to fly commercial. The same holds true for Wichita.

It Boils down to Supply and Demand

Meanwhile, hundreds of commuter jets are coming into the market.  Utilization of corporate jets is 1/20 of a commercial jet.  Corporations are looking for increased revenue from their jet assets.  Manufacturers can deliver white tails into a new air-service system to keep production lines steady. Airlines can off load volatility (overbooking and low yield flights) to private carriers, Next Gen air traffic control will open thousands of smaller airports to air service, ironically, this includes Wichita.

This boils down to huge inventory, huge need, greater efficiency, and nobody to serve the market.  Our prediction is that Social media is the glue that will hold this thing together.  People travel across their social graph (Facebook, linkedin, and g+ connections) not to the hub airports, period.  People want to work where they live and play, not just surviving in 1 of 28 U.S. hub cities. People want to go to where they are going.

There is profound opportunity in private aviation and Social Flights is the pioneer.

Picture credit: Wealth Informatics

The race to the bottom that everyone has been watching in the airline price wars may have finally ended. All the frills have been extracted, all the expectations have been dashed, and the glamour of the jet-age has all the luster of a drive-in movie.  The bottom has been achieved.

The entire value chain, from airport taxes to hotel rooms and parking fees have happily stepped into the low-cost void, ready and willing to pick up the slack in airline prices.  The taxi from my house to Seattle Tacoma airport costs more than the airfare to San Francisco.  Three days of parking at the airport costs more than the taxi.  Off lot parking is not much better. God forbid that hunger arrives at it’s destination before you do.

Now watch the prices start slowly creeping upward as airlines come back leaner and meaner subsidized by the pensions of their workers in the post-bankruptcy glory of the deregulation act of 1978.   If American business has been accused of shortsightedness, the 25 year plan of the airline industry is pure brilliance – assuming it was a plan.

From USAToday:  

A new American Express Business Insights study finds that spending on first- and business-class airline tickets increased by 9.1% and 5.4%, respectively, in the third quarter. But on the ground, travelers spent more of their dollars — an additional 10.5% — on economy lodging vs. only 2.2% more on luxury hotel accommodations in that time.

There are likely several reasons for the shift in spending patterns.  Travelers are valuing the products on a “true value” basis.  The value of business class treatment and comfort exceeds the value of luxury accommodations.  Interesting.

The spending trend applies to traveling for business or leisure, the study indicates. ”It really speaks to the fact that (consumers are) so concerned about the airline experience that they’re willing to make the trade-off,” says Maryam Wehe, senior vice president of hospitality at Applied Predictive Technologies. 

How much would a business passenger justify to shorten the air travel portion by 50% while also eliminating two overnight stays?  At Social Flights, we can often provide a door-to-door travel experience that is 60% – 80% shorter in total time yet costs the exact same amount in dollar terms.  Guess what – that’s what Social Flights can do for you.  Social flights provides on-demand, direct, and comfortable private jet travel in a ride sharing form so that you get more travel for less money.

Many experts estimate that only 20% of economic impact is measured in financial value – rather, most of it is measured in intangible value.  The work of visionaries in the areas of Intangible Value and the value of social networks are able to articulate value far beyond that which can be counted with money.  Suppose these principles could be applied not only to corporations, but also to communities sharing an asset such as an airport?

In the race to defend valuable assets from the fiscal cutting room floor, communities are increasingly trying to define themselves in terms of shared community assets from schools to parks museums and even airports.

From:  Worcester Telegram & Gazette – telegram.com.

State officials released a study yesterday saying that Worcester Regional Airport is a boon to the local economy, even though the airport has struggled for years and offers charter service through just one carrier.  The study released by the Department of Transportation said the airport supports 418 jobs and has an annual economic benefit to the tune of $51.4 million.

The Intangible Value Drivers include the following questions for corporations, but this also applies to any community sharing a set of assets.  From Mary Adams from her recent book Intangible Capital, she asks:

• How do you get paid (the key revenue categories on your income statement)? (strategic capital)
• What are the processes and knowledge/data that drive this revenue? (structural capital)
• What are the competencies that your people need to support this business model? (human capital)
• What are the key external relationships that make this model work? (relationship capital)

Apply these intangible principles to any community:

Few people take into account the social value of air transportation.  There are very few studies that can measure the impact on a community when they are immobilized due to lack of a service that had previously been available. There is no true economic category to describe such loss except as a tax on travel.

A regressive tax is taxation that takes a larger percentage from low-income people than from high-income people. A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder. Social Flights can restore this value with a regionalized public jet charter system.

Now we can add “Travel” to the list

Sales taxes that apply to essentials are generally considered to be regressive as well because expenses for food, clothing and shelter tend to make up a higher percentage of a lower income consumer’s overall budget. In this case, even though the tax may be uniform (such as 7% sales tax), lower income consumers are more affected by it because they are less able to afford it.

<via American Eagle to park planes, reduce service – Dallas Business Journal>

The small city gets the regressive travel tax

American Eagle announced that they would reduce frequency in a few select markets, they would discontinued seasonal service from D/FW to Augusta, Ga. Eagle would also discontinued service from Chicago to Tri-Cities, Tenn as well as discontinued service between Miami and Savanna, Ga., and Miami and Fort Myers, Florida.  American Eagle would also hasten the cancellation of Los Angeles-Boise, Chicago-Calgary and D/FW-Fayetteville, N.C., service from Feb. 9 to Jan. 31.

So how many people would these reduction in service decisions impact? If we just add up the populations of the smaller metropolitan area in each city pair, we can estimate economic loss of opportunity under the assumption that the larger city would have alternate options. Fair enough?

Augusta, GA: 556,877

Tri Cities, TN:  500,538

Savanna, GA: 347,611

Ft Meyers, Fl: 618,754

Boise, Id: 616,500

Calgary: 1,230,248

Fayetteville, NC:  366,383

The Creeping Costs

The total is at least 4 million who will lose one more degree of economic freedom.  4 million people will pay a regressive tax denominated in time, money, and dignity in some form or another for the benefit of stockholders in American Eagle. 4 million people will lose the economic benefit of travelers from large cities.

On closer inspection, with the exception of Calgary and Boise, all of these cities are well within 1000 miles of each other.  Each of these cities is well within 1000 miles of cities just as large as those that American Eagle is diminishing service.

While a hub and spoke model may break down economically, a regionalization strategy may work quite well.  It has been proven that people are willing to pay a premium for direct service (otherwise the airlines would not be dropping less profitable indirect service).  It is also obvious that people place a premium on their time and hassle as demonstrated by trends in online shopping, communication, and social organization.

These ingredients simple add up to a regionalization air transportation route structure enabled by online social organization tools such as Social Flights where community airlines can form around community priorities.  Social Flights can restore this value with a regionalized public jet charter system.

I often feel “Lost” as I continuously review what is happening in the air transportation industry. So many people are stranded in time and place by the anxieties, harassment, and limitation the air transportation system.  It is only getting worse as airlines push in and pull out of markets with abandon disrupting the dreams and aspirations of millions of people with the stroke of keyboard.

Or, perhaps it is the holiday season now upon us that leads me along the nostalgic trail of family and friends who I miss so dearly. Or, it could be the recession that forces me to look outside my own community to achieve economic security in these difficult times. Meanwhile; social media technology increases my exposure to like minded people, new ideas, and a bewildering array of events and opportunities – many of which I can no longer access efficiently.

The easy thing to do would be to accomodate the situation and limit my goals and aspirations to that which others serve up to me on the platter of their choice.  I could simply give up and be content with my lot in life as determined by others.  I could dedicate my talent, education, and experience to lesser parochial tasks that happen along the jungle trail.

Or, I can seek the vulnerabilities of the forces that control my ability to travel.  I can exploit weaknesses in their business model and I can find others willing to join forces to bypass those externalities altogether.

I have chosen the latter and in the process, I have met some of the smartest, engaging, and interesting people that I could have imagined.  I no longer flash back to the past – I flash forward to the future.  That is the secret ingredient to never being stranded in the choices of others.

2012 will be the tipping point for many people. I believe that communities will begin to organize around the assets that government and corporations can no longer provide.  Communities will make the choices that determine their own future, sanctity, and preservation.  Self-organization will become the fabric of the social landscape.

My job it to show people that there is no reason why they cannot run their own airline; any where and any time they choose.

National Public Radio recently aired 2 very interesting segments on the airline industry.  The first segment cited companies leaving small cities because of poor air transportation service. The second segment cited an interesting statistic; all of the airlines that existed before the deregulation act of 1978 have gone bankrupt.

But wait, wasn’t airline deregulation supposed to be good for the airlines?  Wasn’t it supposed to spawn innovation and drive economies of scale?  Wasn’t it supposed to increase choices for the airline passenger?

Well, at least one of these impacts is true; deregulation spawned innovation – although probably not the way it was predicted in 1978.  Today, new technologies are appearing everywhere from new forms of social organization to faster and smarter aircraft systems.   This article features a very interesting aircraft sector called the personal sport jet.  While I do not know enough about their actual business model, it would appear that they are aiming where the airlines and major manufacturers simply cannot reach.

With an operating cost of $400 per hour instead of $1200-$2000 per hour in this class, the excel sportjet can deliver a 2 hour jet flight performance in a “regionalization” market.  Social media trends show us that people are connected in shorter distances and far more diverse locations than the hub and spoke system can accomodate.

This aircraft is small, lightweight, and fast.  It uses a single jet engine and flies at a lower altitude reducing pressurization forces and associated cost. The Sport Jet II carries 4 people and employs extensive use of composites in addition to simplified pilot qualification requirements.

Clayton Christensen’s book “The Innovator’s Dilemma” cites numerous now classic examples of how industries are threatened by simple upstarts that deliver what the customer wants at a price they can afford without the complexity and “over-performance” burden that mainstream players evolve into.

While the aviation business is very complicated, it is truly a pleasure to witness new products and innovations that come to market under the radar of the big players.  We hope that they grow to have an impact on the industry.  After all, that is what Social Flights is all about.

Bravo Sport Jet II, Bravo. 

Ok, now this airline game is becoming serious business.  It is bad enough when small communities that never had air service options have given up trying to grow (where new opportunities fail to materialize and young knowledge workers move away).  It’s a whole different matter when companies pick up and leave a community because the airlines pull the plug on air service.

[via When Airlines Depart Cities, Businesses May Follow : NPR]

Last month when Chiquita announced it was moving its corporate headquarters from Ohio to North Carolina, it said it was lured there in part by the number of flights in and out of the Charlotte Douglas International Airport. Cincinnati came out on the losing end of the deal because like so many other cities, it faces a shrinking airline hub, which can affect the city’s business climate.

US Cities are vulnerable to decreased economic development due to Airline Service loss

Regressive Economics

When a company leaves town, it takes with it the self-identity of the people who worked their entire careers to make that company great.  When people are forced to migrate to find new work, they impose a cost on their families and futures.  While corporations maintain economic freedom to make decisions in their own best interest, the public does not have the economic freedom to respond in their own best interest.

Daily Departures

Cincinnati; At peak, 2005: 673 daily (5 international); Current: 200 daily (1 international)

Pittsburgh; At peak, 2001: 579 daily (3 international); Current: 145 daily, (1 international)

St. Louis; peak 2001: 595 daily; Current: 250 daily

And, this is ONLY THREE Cities. 

Looking at the above statistics; well over 1000 flights per day have been eliminated from these three not-so-small cities.  That is 365,000 flights denying economic equality to over 50 million travelers in a single year.  The scale of entrepreneur career-years alone squandered due to lack of air service is absolutely catastrophic for the American Economy. The irony is that people who move away need to travel more to stay connected to families. The economic friction imposed on communities is staggering.   

“I remember coming here a few years ago and it was a hub of activity, you know, with all three concourses,” he says. “Now there’s only … one concourse left, if that, and it’s just really amazing to see this huge infrastructure supporting very little flights.”

Van der Horst with the Cincinnati chamber says she doesn’t expect Delta to go back to 673 flights a day at CVG, but she knows that for Cincinnati to attract and retain more business, it will mean landing more flights.

Social Flights is working overtime to create a Community Air Service Program that allows communities to access modern jet aircraft to fulfill their own travel needs whether they need direct flights, hub flights, corporate shuttle flights, or charter jet operations.  Social Flights has the operational experience to teach communities how to manage their own air transportation operations through their own airports, FBOs, and responding to their own social priorities with modern aircraft.

Economic Freedom belongs to everyone. This is the cornerstone of the Social Flights business model –  Social Flights is the people’s airline.  Let us know where you want to go, before someone else does that for you….