Plane Conversations

Frontier Airlines recently announced it’s dropping nonstop service from Milwaukee to six cities, cutting the number of daily flights nearly in half. Effective in April, the airline will end direct flights to Grand Rapids, Dallas-Fort Worth, Kansas City, Philadelphia, Phoenix and Newark. Frontier’s daily departures will be reduced from 32 to 18.

While Social Flights is announcing new air service between Milwaukee, Branson, Nashville, and Austin – Frontier Airlines is announcing the reduction of services and staff from Milwaukee.  The following report from media FOX6now and Milwaukee Business Journal highlight some of the local implications, impacts, broken promises and lost dreams.

According to a notice filed Monday with the Wisconsin Department of Workforce Development, the layoffs are expected to occur in April. The notice states that 230 of the employees are flight crew members who will be reassigned to bases outside of Milwaukee.

230 of the 446 layoffs will be reassigned – as will their families, their children will move out of school, houses will be liquidated in a poor RE market, and communities will lose trust anchors. The new cuts are on top of Frontier‘s decision last fall to eliminate routes to eight other destinations.

Milwaukee Mayor Tom Barrett released a statement Monday after these layoffs were announced, saying: “The loss of 500 jobs is a setback for the region.  My hope is that other airlines will step in and fill the void in this critically important market.”

Frontier is leaving Milwaukee for reasons that would also hold for every other airline; fuel prices, labor prices, large jets, corporate ROI thresholds, etc.  Meanwhile, Social Flights operates under public charter regulations organizing local private operators and supports them with modern aircraft allowing communities to access important hubs as well as sister cities (such as Grand Rapids).

The Community Remembers the promises:

“When that whole deal was made, when Republic bought Midwest and Frontier, there were all these promises made to Milwaukee that they were not only going to keep the service here, but that they were going to bring in hundreds and hundreds of jobs,” Rovito said.

Instead, nearly 800 positions have been cut since November, and the most recent wave of cuts will move more than 200 jobs out of Milwaukee, while completely getting rid of another 200. “Just on its face, it’s really bad news for Milwaukee travelers,” Rovito said.

Who holds the cards?

Communities go through great efforts to attract air service from promising yields to providing public infrastructure to enduring noise and traffic – the airlines take this completely for granted.

Fewer flights means it will be more difficult for travelers to get to their destinations, and also likely more expensive. “It was a convenient flight for me in this particular instance,” Scott Sowa, who was on a Frontier flight heading to Grand Rapids, said. “I would hate to lose that convenience.”

Apparently, communities are not what Frontier needs to remain profitable.  They no longer need Milwaukee because they found business elsewhere.  They are an airline – they can go elsewhere…. they are not a community.

Where communities are the contingency plan

In a statement, the company says: “The reduction in service is another step in our continued effort to ensure that Frontier is a competitive and sustainably profitable airline.”

In other words, ‘Their survival is contingent upon your loss – not your gain.’ FOX6 tried to get in touch with someone from Frontier Airlines Monday, but our calls were unreturned.

Beginning in June 2012, Branson Air in cooperation with CFM aviation and Social Flights, is offering a limited time 79 dollar special on air service between Milwaukee Wisconsin and Branson Missouri. This price will not last long since the route is filling fast.  The next threshold special is 99 dollars…and there is no wonder why tickets are selling fast.

This announcement comes on the heels of air service between Nashville and Branson as well as Austin and Branson.  All continuing flights connect all cities.  This is a big deal for people who travel between secondary markets.

If you are asking yourself what you would do when you get to your final destination,  just check out these posts:

102 Things to do in Branson

101 Things to do in Austin

 101 Things to do in Milwaukee

102 Things to do in Nashville

Or, think of it this way:  

Do a Google search on “Milwaukee Facebook” and you’ll received 183 Million returns.  Next, perform a search on terms: “Branson MO Facebook” and you’ll receive 3.7 Million returns. Finally, do a search on the terms “Branson MO Milwaukee WI Facebook” and you’ll received 1.1 Million returns.

Next, search for airfare from Milwaukee to Branson you’ll find the following result:

NOW, look at the flight from Branson to Milwaukee !!

Hmmm … why does it cost 200 dollars more and take 4 more hours (stationary) to fly from Branson to Milwaukee than from Milwaukee to Branson???

A recipe for opportunity

While this is far from a scientific research study, there is little doubt that many people in Branson know somebody in Milwaukee and vice versa.  There are many people in Milwaukee that can find a reason to hop a quick plane out to Branson with all of their friends.  Look at the disadvantage that the smaller community has – small communities are  SUBSIDIZING the larger community!!  The distance is the same so the price should be the same.

By extension – look at all of the communities on the map above that social flight can connect for 1/2 the price and half the transit time of the airlines

Most importantly, there are many things that were never economically possible between these two cities,  but now are.  That is what opportunity is made of.

People who follow Social Flights know that our business model is hugely disruptive to the airlines.  They know that Social Flights opens new frontiers of opportunity.  They know that Social Flights liberates stranded communities from Airline Chess Masters.  With air service between Branson and Austin for under 100 dollars – this is only the beginning.

So the choice is simple;

There are hundreds of things to do with millions of friends, colleagues, relatives, and business relationships for 200 dollars on a flight that lasts less than two hours. Or, spend close to 500 dollars on a 8 hour boondoggle losing two days of work and spending an two extra nights in a hotel with people you don’t know.  The choice is obvious.

Who knew that having fun could be such serious business?

Social Flights will soon release Part 2 of the Operators Whitepaper.  Part 1 identified the intrinsic value of private aviation to a travel market.  Part 2 will identify some of the technology challenges of integrating with the mainstream travel community.

In short, the next step for private aviation is to integrate with the mainstream market while offering seamless transition with other technologies and transportation modes. The following is a summary of Part 2.

The Technology Challenge

Technology is encroaching on every aspect of the travel industry from on-line travel agencies to Next Generation Air Traffic Management.  It is no longer sufficient to have a great looking website, the data that private operators collects and distributes must be compatible with all other services that support the customer long before and long after they cross your threshold.

Compatibility of Pricing

One example is in compatibility of pricing; private airplanes are priced by the flight-hours imposed on a private aircraft. However,  commercial airplanes are priced by the market availability of seats.  There is no way for the customer to compare these two travel options; as such, these markets are segmented by price incompatibility.  The trend is increasing through the unbundling of services like baggage fees and check in fees and convenience fees, hotel, and car rentals contracts, discount coupons, etc.

True Value / Time Value

A vastly neglected aspect of travel is called True Value. For example; the cost of traveling to a hub airport often exceeds the cost of the airline ticket.  The time waiting for TSA screening and connecting flights often exceeds the in-route flight time.  The total transit time often exceeds the time that the traveler needs to be at the location.  Weekend travel is impossible without extra hotel stays and missing one or two days of work.  Time is money.  Lost opportunity is money. Life is short.

Alternate Technologies

Alternate technologies such as mobile connectivity and social media drive different migration patters of people, business and entertainment. Facebook, Linkedin, Twitter, and Google offer alternate ways for people to communicate in lieu of travel, but they also expose more people to more places that are less accessible by commercial aviation.

The Integration

Today, the travel market is segmented in information silos where companies hoard information in the name of competitive advantage.  However, when prices are comparable, the market can apply a time/value formula where alternate technologies enhance the value of travel.  Then, and only then can the entire door-to-door travel experience can be fully integrated in an efficient market where everyone playing the travel game shares information, combines services, and collaborate in the best interest of the customer.

It’s a game, let’s have fun

From Analytics Magazine

Airline accountants and statisticians perform two extremely important functions. The first is called “Yield Management” and the second is called “Fleet Management”.

Yield management is how airlines put the right customer in the right seat at the right price.  Fleet management assigns the right airplane to the right time table at the rights price.  This is the important integration for all airlines.

The Easy Way Outbound

Most charter brokers do not bother with yield management or fleet management.  They hammer hard on sales; they scope out the wealthiest passengers and find them the jet that delivers (to the broker) a profit they can sell up to the passenger for fast turnaround.  They neither expand the market to more people nor help existing clients share a plane among each other.

With proper yield management, a private ticket could “value out’ the same as a premium class commercial fare.  The North American premium class market accounts for 6.6% of all airline traffic and 22.7% of all commercial airline revenue (IATA 2010) of 147 Billion dollars.  Premium travel is a 30 Billion Dollar Industry. General Aviation Manufacturers Association (GAMMA) shows total billing of general aviation aircraft of $7.3 billion.

How to Double Your Market

Applications of yield management can easily double the number of passengers that would take a seat on a private aircraft.  Meanwhile application of fleet management can nearly double the amount of available revenue seats; after all, 40% of private flights are empty.

Today’s private aviation industry has both a fragmented supply and a fragmented demand.  Operators do not communicate with each other, they do not share legs, They do not share inventory, they do not allow customers to talk to each other or share a jet between them.  Even the taxi industry lets people share a cab.  As long as the industry is fragmented, investors, hospitality partners, and most importantly, passengers, will look elsewhere for their investment in time and money.

New Features At Social Flights

Social Flights offers instant quote feature that allows passengers to immediately cost out the price and flight time for a private aircraft between any two airports in the US.   Social Flights then helps passengers communicate with each other so that they know the true cost before they are accosted by a broker.  Social Flights publishes a wide range of aircraft and airports where they may fly.

Social Flights builds alliances and partnerships with owners, operator, passengers, hospitality, and support services so that everyone can see what everyone else is doing and price accordingly.  Social flights posts empty legs, lists events in various cities, and refers service providers that can help out passengers on the ground

Watch us Grow

Keep in mind that each of these features represent initial applications of both yield management and fleet management.  This is a huge innovation for private aviation.  As the dataset increases and becomes integrated, we will begin performing essential calculations that the airlines use to manage their fleets.

Bring your information and inventory to us and let us combine it into new markets and customers – there is a lot more going on at Social Flights than many people realize.

Technology is encroaching on every aspect of our lives and aviation is no exception.  But, technology is only as strong as the weakest link in the value chain.  In aviation, however, the weakest link also happens to be the smartest and most numerous link.

Technological advances in commercial aviation increase airline margins, but technological advances in public information technology decrease airline margins. 

The airlines use data technologies to pack routes tighter in order to maximize their profitability.  On the other hand, the Online Travel Agent (OTA) use data technologies to drive prices downward. Lower prices minimize airline profitability – this forces more packing of airplanes.

This leaves the traveler holding the red tape with the elimination of routes, erosion of service, crowded flights, and the emergence of added fees, etc.  What happens when the traveler “link” snaps?

When the weakest link breaks, new ones form. From Seth Godin

The magic of our new form of communication is that it’s no longer one-way. If you consume an app, you can write one. If you can read a blog, you can publish one. If you can grab an ebook, you can produce one.

The center has nothing to do with geography any longer. The center is a state of mind.

Aikido Air Service 

Aikido is a martial art which uses the principle of non-resistance, moving with the direction of the opponent’s force and redirecting the attack until it is no longer a threat.  Likewise, markets flow in the direction of information.  Wherever there is an “information conflict”, the opening of new information channels can redirect the market to new innovation instead of continued conflict.

The same NextGen technology also makes it easier for smaller airports to have efficient air traffic control, this will reduce the cost of point-to-point travel. The same OTA technology can effectively list smaller aircraft flying point to point as well as ground transportation and hospitality.

The weakest link also happens to a “state of mind”

The next generation online travel agent may publish all aircraft data and ground transportation in a comparable pricing structure so that information can flow in new directions.    The technology of the weakest link simply turns them into strengths by using the opposing forces against themselves.

Social media technology is becoming the dominant marketing tool for on ground events and services and Social Flights is leading that charge. These technologies will change the calculus that the airlines and operators use to optimize aircraft.  That is how the circle will be reversed.

A study released by Adify analyzed the average CPMs paid by various vertical categories of advertisers. The travel industry, generates 8.5 Billion image-based ad impressions per year in a highly competitive category.  Travel is a very reliable source of revenue for media networks and major publishers.  It is no surprise then that the average amount of money that an advertiser would pay for 1000 impressions (CPM) in the travel sector is $19.89 .

Yes, an advertiser would pay 20 dollars to put their name in front of 1000 travelers.  That is real money.  Suppose that the price of  filling an empty seat on an empty leg (in aerodynamic drag) is 100 dollars for a given distance. If that person is a travel blogger they would need to have a minimum readership of 5000 in order to equal the value of the seat in marketing dollars.

Unlike the pre-Internet world, today there are literally thousands of people walking around with 100,000 Twitter followers, 50,000 blog hits readership, YouTube views in the millions, layers upon layers of Linkedin connections and Facebook friends; never have so many people had such levels of influence.  This is unprecedented in marketing history. A jet operator can easily leverage this value straight on to their balance sheet.  The Social Flights Platform will be able to bring the the operator the types of relationships that translate to the bottom line and increase net sales.

The Private Jet Amplifier

Aviation is a very important industry for many important reasons.  Powered flight has captured the imaginations of generations of people because airplanes appeal on a very deep level in terms of pride, technology, freedom, and adventure.  People pay attention to news articles involving aviation. Aviation and aerospace are the most desirable industry for economic development communities. In fact, many things that are not news, become news only because they happened on or near airplanes.

This is a built in advantage that any brand manager would love to have because aviation amplifies a market message. So while empty seats on empty legs may be hard to sell outright, they may still contain a huge amount of value for the private aviation industry.

Private jet travel has the ability to amplify the image of the brand.  As Rolex and Breitling have known for years: associate the brand with high performance and the image of quality is reinforced well beyond actual value.  A hotel whose guests arrive by private jet is amplified as a preferred service provider.  Products used by people who fly private are considered to have the highest performance. An event that attracts private jet passengers is one that should not be missed. Etc.

When you combine the two effects of high CPM and Jet Amplifier; there are many combinations and associations of passengers and sponsors who would  make the effort very worthwhile for the operator to fill empty legs with influential people.

If the operator offers empty legs to a hospital, their patients and their families, they will get brand recognition among doctors and executive administrators.  If the operator offers empty legs to a local charity, they will earn brand recognition among politicians and community leaders.  If the operator offers empty seats to industry conferences, they will gain brand recognition among corporate executives and VIP speakers.

Social Flights can translate this value and deliver it to your bottom line. It’s only a matter of being in the right place at the right time – that’s a game you can win playing by your rules.

Read more: http://www.businessinsider.com/chart-of-the-day-cpm-verticals-2009-8#ixzz1mNamoUJb

Social Flights introduces a common platform for travelers to access private jet inventory.  By decreasing the cost of organizing individual passengers, our partner operators are rewarded with access to groups of people ready to purchase your primary and your empty legs.

Empty legs are created after an airplane delivers passengers to a destination and must then return back to base empty.  The pilots must return to their families and the aircraft must return to service or scheduled maintenance.  The result is that up to 40% of private aircraft flights are empty.  Over the years there have been many attempts to sell empty seats but success rates rarely exceed 5%.

This creation of empty legs increases the cost (to the customer) of private travel to approximately double the one-way cost of their payload.  The resulting high cost of private travel limits the size of the market and the restricts utilization of aircraft for the owners.

It is expensive to deploy a professional sales staff without prequalifying the customer for sufficient resources, frequency of travel, and repeat business.  A high quality sales force is required because aviation is a complex industry and the price of the product can easily exceed 5 digits.

Empty legs are expensive to sell because the passenger does not walk through the door prequalified.  Empty seats are even more expensive to sell because it takes the same amount of time to sell an individual seat as it does the whole plane; and each person and their special need multiplies the level of complexity.  Finally, the FAA is very strict on the operator’s ability to schedule flights making it difficult to advertise empty legs or empty seats.

The economic value of empty legs would be huge if a platform existed that could sell them as primary flights.  Social Flights has combined our expertise in charter operations with social media organization to create exactly such a system.

Social Flights Creates an environment where operators can minimize the cost of selling empty legs by providing a common information platform that engages and educates the traveler so that a sales professional is not needed to manage every deal.  Social Flights uses social media tools and methods to help people self-organize around an operator’s inventory wherever it may be.  Social Flights combines inventory from many operators in many locations to offer travelers a seamless experience.  Social Flights manages contracts, consideration, and payments.

If you are an owner or operator, we’ll show you how to send us your inventory and scheduling feeds at no cost and we’ll do the rest.  As our system grows, we’ll deploy community organizers across the country and among substantial verticals who will bring customers right to your door step so that you can deliver them right to their door step.

A vertical market (often referred to simply as a “vertical”) is a group of similar businesses and customers that engage in trade based on specific and specialized needs.  Vertical marketing can be witnessed at trade shows. Obviously, the term “vertical” has important implications for the aviation industry and I could not help myself from playing with these words.

At Social Flights, we are constantly researching methods and systems that will cause “the value game” to spin freely.  In quick review, the value game involves the 4 pillars (again, verticals) of our business plan; the operators, the travelers, hospitality industry, and the entrepreneurial community must come together around the shared aircraft.

One of the key elements is finding the skill set for hundreds of entrepreneurs “community organizers” that we will deploy to geographic areas to help fill private airplane inventory in both directions (to fill primary and empty legs). The more that we study this very important community role, the more we realize that the skill set is most dependent on knowledge of vertical (there’s that word again) markets.

Verticals

For example;  We seek to find someone with a great deal of knowledge of the national wedding planner industry who can access the data from all wedding planners and combine it with the data from the Social Flights Network.  Our algorithms will determine matches and the community organizer will create the flights.  Similar Verticals include Life event, holiday, and funeral Industry.

Professional Event:  We also seek people with strong ties to a University where we could locate aircraft to suit predictable needs such as alumni weekend, spring break, intercollegiate tournaments, academic recruitment, and vip lecturers.  The person who can manage this type of relationship can earn a significant amount of revenue on a residual basis for managing and maintaining the relationship.  Similar verticals would include professional events, industry events, and retreats.

Corporate Travel Vertical: More and more companies are looking for ways to save costs on jet ownership while also avoiding the commercial aviation system.  When we look at the data, a significant proportion of travel is going to the same places; i.e., remote offices, branches, production facilities or meeting long term customers and sources.  A person who is familiar with the travel needs of corporations can make an extraordinary income with Social Flights.

So let this be a call to action for entrepreneurs and travelers alike.  Look at your network.  Do you command respect and influence in your vertical?  Are you looking for a way to earn residual income for your social, creative, and intellectual knowledge assets?  Are you good with numbers and can you spot the arbitrage opportunities in raw data?  Then maybe you should consider an affiliate relationship or franchise ownership with Social Flights.

After all, the opportunities are…well….vertical.

Until we can price all air transportation correctly, we will not be able to price any air transportation correctly.

Social Flights is the premier air transportation company that sells private jet service on a per seat basis.  This is important because there is no other way to compare the time-value of a private jet against the time-value of a commercial jet unless they are priced in the same manner.

Unfortunately, highly competitive markets determine the price of a seat on a commercial airline, not necessarily distance of the flight.  This does not make very much sense – for nearly any other product, you pay for how much you consume. If only commercial airlines were priced like private aircraft: by the mile.

Why does an airline ticket need to be 400 dollars 6 weeks prior to departure and 600 dollars 2 weeks prior to departure, except to maximize profit? Nothing else changes except as a proportion to distance traveled. But think of all the accountants, marketing personnel, and strategic planners constantly manipulating price inputs that have nothing to do with passenger satisfaction.

Every airline use essentially the same types of aircraft, they pay the same cost in fuel, and they have similar direct costs in labor, landing fees and gate contracts.  You would think that a 3000-mile trip would cost X amount more than a 1500-mile trip… all day long, for each and every airline.

This chart shows the actual fuel cost to carry a 200 lb payload 1750 miles between DFW and LAX for various types of commercial aircraft assuming jet fuel price is about 3 dollars per gallon (at the time that this industry study was published).

I did some back o’ the napkin calculations and concluded that a Lear 35 burns 5 times more fuel per 200 lb passenger than an MD-80.  A Phenom 300 is about half of that, or 2.5 times that of the MD-80.  The average would be around 3.3 times the commercial jet.

The Golden Ratio

This is a terribly difficult calculation to make so bear with my assumptions here.  But suppose all things being equal, we can say generally that a private aircraft cost is 3 -5 times greater than the commercial airplane while the door-to-door time is  1/3 – 1/5 the time of the commercial flight.  The factor of 3 – 5 (depending on the comparable averages) puts the cost of the traveler time in parity with the cost of the airline time.

Why does this matter?

Now, some honest comparative market analysis can take place by simply adding and subtracting time and money from both parts of the Golden Ratio to account for various attributes of the trip.  For example: shorter drive to smaller airports, no long lines, non-stop flights can be added or subtracted from the “time” part of the ratio.  Meanwhile; the cost of parking, airport taxes, cost of food, cost of lodging, and the cost of traveling to your final destination, etc., can be added or subtracted from the cost side of the ratio.

The Data will set us free

To liberate this information is to empower the traveler, the operators, the community and the hospitality industry to make rational decisions.  Communities can design rational incentives for tourism.  Corporations can make rational decisions for employee travel, and economic planners can make rational investments in intermodal transportation.

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.