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.

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This past week I spent a quick seven days in China, mostly in Beijing, but also a couple days in the south in Shenzhen and Zhuhai.

Zhuhai is the host airport for China’s International Air Show that promises to grow in importance over the coming years. The format of the Air Show was a combination of performance by jet teams, with exhibition halls and static display of aircraft on the tarmac – both military and civilian.

China’s national aviation industry company – AVIC – dominated the exhibit halls with mockups of military, UAV, airline and even small general aviation designs of the future.

Besides the day at the Airshow we also got to visit an FBO / Charter base in Beijing of Deerjet, which presently is China’s largest corporate jet charter company. Deerjet is a wholly owned subsidiary of Hainan Airlines and operates under the authority of the airline’s authority to fly both domestic and international flights. Over a short few years Deerjet has grown its fleet of mid and heavy corporate jets to 35.

In conversations with various people in country about how GA is developing, the prevailing opinion about the use of corporate jets so far is that it is primarily for pleasure flights for the newly created wealthy. I did not see many smaller GA aircraft – light jet, turboprop or piston singles. The few aircraft I did see on the ramps at three large airports were Gulfstream, Challenger and Hawker 800 series.

For the elite, the prestige of showing up in a Gulfstream matters more than price or efficiency.

The “Fixed Base Operation” as a support for GA is almost non-existent at this point. Which comes first – the aircraft or the FBO? I guess it will be the aircraft and then the FBO may eventually show up at airports to meet the demands of private jet flights.

In a country of fast growth, huge geographical scope, and 1.4 billion of the world’s population there has to be a tremendous opportunity for GA in the next 20 years.

Our company, along with Middle Tennessee State University’s Aerospace Department, will host a delegation from China in December that will have focused discussions on general aviation trends in China. The delegation will include legal scholars looking at airspace laws, members of the CAAC and senior managers of a China GA company.

This trip to China was an opportunity to meet people, build relationships and get a first hand view of what is happening in the GA sector of the aviation industry. The buzz in media and government in the country indicates that the government recognizes the value of a developing GA industry and the benefits in job creation and economic efficiency.

They have not figured out just yet how GA works as it does in the US and Europe, but they will figure it out. How long will it take and how fast will it grow are the bigger questions.

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In a recent meeting of shareholders, Berkshire-Hathaway executives reported that NetJets has returned to profitability after big losses in 2009. The company reports that NetJets had a pretax profit of $ 57 million (US) in the first quarter of this year which is compared to a $ 96 million (US) loss last year.

Warren Buffett attributes the turn around to putting David Sokol in charge. David Sokol also runs the company’s energy – utility business, MidAmerican, and is a candidate to take over Berkshire Hathaway’s operating businesses as a successor to Buffett.  

We have posted a couple articles on NetJets over the past few months regarding the viability of their business model built on fractional jet operations. NetJets is a key leader in our industry and how they fare will make a big difference in the future of private jet travel.  

The key will be if the company can sustain profitability over the long haul. If they can, then it proves they have a working business model. One quarter of profit or even one year of profit does not make a business. You can cut overhead and get most any business profitable if there is some present sustainable revenue stream, but can you grow it in the new economy? Will more people line up to buy fractions of business jets as they did in the last 15 years?

A lot of new business jet orders were canceled in the downturn of the economy. Will NetJets start ordering new aircraft again? Will they operate under a similar business model as they have in the past or will they have to come up with a new way of structuring their fractional business to make it work in the future?

It costs a lot of money to own and operate a business jet and there are fewer companies today than there were two years ago who are willing to spend the money, whether it is a whole aircraft or a fraction. NetJets may get new business from companies who overreacted by shutting down their flight departments last year; but, that will be limited.

Unless business jet travel innovates to the point where the occupied seat cost is brought down significantly, the NetJets client will remain the high end business user and elite traveler. That market is small in comparison to the rest of the travel market.

So where does the new client for flying on a business jet come from?

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There has been a lot of press lately about the airlines continuing to add fees for everything they can think of.

I don’t know what these guys are thinking when they do this.  

An article on CNN’s site quoting airline consultant Robert Mann, says the following about their thinking:

 Airline consultant Robert Mann of R.W. Mann & Co. expects the carry-on and possible toilet fee to remain firmly in the realm of the aggressive discount carriers, who capitalize on “an infinite demand for very low fares.”

“A lot of people will put up with a lot of inconvenience and crazy fees in order to think they got a low fare,” Mann said.

Can they not just figure out how to charge a price and make money to cover it? Are they trying to modify our traveling behavior through a pricing scheme?  

There is now proposed legislation requiring the airlines to disclose their add on fees to the customer in a way that you would really know what you are paying prior to travel.

So should we require McDonalds to tell you how much they are charging for the special sauce when you buy the Big Mac? Or can we be content that we either think the Big Mac is worth it at the price, or we don’t buy it.

Every time the airlines irritate the consumer with their pricing schemes or bad schedules or whatever the irritant of the day is, the government tries to legislate some way to make them behave.

Most of the airlines you fly on have their flight attendants thank you for choosing them.  It goes something like this: “Thanks for flying with us today; we know you have a choice and we are glad you chose us”.

Our friend Dan Robles who posts frequently on Plane Conversations writes the following about the airlines pricing schemes in a recent post on his site:

Steven Frishling (www.flyingwithfish.com) predicts that there will be a schism in the industry, some airlines will take on the race to the bottom with ancillary fees and others will realize that every angry customer is an opportunity to migrate to a superior travel experience.

Charging is obnoxious – every hit hurts. In fact, Expedia makes the majority of their fees off everything except airlines, why can’t airlines?

Steven suggests that the opposite of bundling – integrating hotels, taxis, sponsors, etc even using frequent flyer miles – is a the best way to improve the experience of flying.  Airlines should provide targeted portals, build sponsored content, attract sponsor revenue, supply hotlinks, etc. All of these are clever ways to derive revenue without alienating passengers.

All this “cost-saving” of ancillary pricing can quickly become a huge liability as competitors come along with comparable prices and superior service. Social media is proving to be an excellent tool for reaching out to passengers and understanding the needs. This allows them to package features smartly, unbundle fees in a way that adds value to the experience, not by squandering trust and respect at every opportunity.

Ultimately, the market will take care of this anti-social behavior of the airlines.  Maybe some airlines will succeed by attracting that “infinite demand for very low fares,” but I have to believe that most of us do not want the confusion, inconvenience and trickery of it all.  

We do have a choice as to who we fly with. We even have a choice to not fly at all. What about the choice to fly in a private aircraft?  Can we offer these consumers a better choice at a price they can live with?

If the airlines aren’t going to do what Steve Frishling suggests, then why don’t we?

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In our ongoing discussions about how to reduce the costs of flying private aircraft by putting together a way to share a ride I posted a blog titled “Would Business Travelers Share?”

We believe that people would be willing to share a private jet flight with others provided it left at a mutually agreed on time both coming and going.

So if you can answer the when question (when we all want to go) what about the who (who will I share a ride with) question?  

Who you would share the flight with?

Would you share a flight with your competitor? Probably not. You would not want to have your competitor in close quarters for two hours listening to your discussions about today’s meeting or presentation.

If you are on a business trip would you share the flight with a group of college kids going to spring break and ready to party?

When you ride on the airlines you don’t have much choice who you sit next to. You may get lucky enough to sit next to Kevin Smith and share his space? Or a bratty kid who keeps kicking you and you can’t kick back?

If you were sharing a ride on a private jet charter flight it would be very easy to know in advance who was sitting next to you. With all of the social media profiling surely you could just go take a look at your seat mates Facebook page or LinkedIn profile and figure out if they might be OK to share the flight with. It would seem that knowing who you are riding with could be very easy to determine and even control.  

You never know, the person you share the flight with may end up being your next friend, client, partner, collaborator…..

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Delta Air Lines’ recent acquisition of North Carolina-based Segrave Aviation speaks volumes about the airline’s recognition that private aviation / business aviation is a viable part of the air transportation system in the United States.

At a time when major air carriers are reducing capacity, pulling out of small markets, and scrapping to make a profit (which for the most part has not happened in a long time), Delta is doubling the size of its corporate jet charter subsidiary Delta Air Elite.

These guys are on to something.

Maybe they see the real value of a system where General Aviation plays a role that compliments the Air Mass Transit System as opposed to viewing us as the enemy?  More and more, airlines seem to be consolidating into route structures that serve the high-density traffic lanes between major US cities on domestic routes and between major US cities and major centers of commerce worldwide on international routes.

Can General Aviation serve as a feeder to the airlines much like their subsidiary and code-sharing commuter airline partners have done over the past 20 years?

General Aviation has the flexibility to move with the markets of demand much easier than the airlines do. Flights can be added at the spur of the moment as demand changes with travel seasons, or even events such as conferences and conventions where thousands of people move to a city for a three day event.

And we all know, for sure, that General Aviation delivers a much more stress free and efficient travel experience than the airlines have delivered so far.  

So maybe the mantra should be if you can’t beat them out of business, buy them?

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There are 77 million of them and, according to an online article on Barron’s website, Baby Boomers are being ignored by marketers.  What’s more, they are being ignored when they are the group who has driven 45% of all consumer spending for the last 60 years.  In the next few years, it is estimated that the number will grow to 52%.

So who are the marketers going after?  They favor the 18- to 49-year-olds, as they are the age group who are forming opinions, forming families, and are making major purchases like homes, cars, etc.  However, they are not the age group with their wallets out ready to spend.  Look at most advertising done today; it is aimed at the younger, hip crowd, in spite of the fact that over half of spending comes from the 45 to 63 year olds.   And this trend is expected to continue for the next 20 years, Barron’s says.

So what about the traveler?  Do we, in the aviation industry, target the Baby Boomers or Gen Xers?  Do we even know?

Travel Marketing Decisions interviewed a series of experts to gather insight into this enormous and potentially lucrative segment.  Below are some truths about Baby Boomers and the marketing implications for the travel industry.

1. Boomers consider travel a necessity, not a luxury. This is good news for the industry on two counts. First, the sheer number of boomers traveling will cause business to grow. Second, since travel is a necessity, Boomers engage in it no matter how scarce their time or money. Their travel behavior, therefore, is less dependent on life stage or the economy.

2. Boomers have traveled more than their predecessors. While their parents first visited Europe when they retired, Boomers criss-crossed the Continent as students.  They’re already seasoned travelers, and know what they like and don’t like.  They also seek out more in-depth ways of experiencing familiar places. 

3. Boomers want to have fun.  It’s not surprising that adult teenagers put a premium on having a good time. Although fun, like beauty, is in the eye of the beholder, Courtney Day, of a New Jersey research and marketing firm, said companionship, stimulation and the cultural/social experience make travel fun for Boomers. She added, “Part of the enjoyment of the experience is knowing it’s unique - that’s part of the rush.”

4. Boomers demand immediate gratification. Unlike their Depression-era parents, Boomers grew up in times of plenty. Easy gratification bred a desire for still more and quicker rewards. As a result, Boomers don’t wait to take the trips they want.  If they don’t have the money, they just use plastic.

5. Boomers are not passive. They want a measure of control in designing their travel experience, and, once on the road, they want to choose their activities. “If you tell them they’re going to do A, B and C, they might want to do E or F,” noted editor Malott. The challenge for travel marketers is to make it clear their product offers plenty of options.

6. Boomers think they are special. Having always been a force to be reckoned with, they are very demanding consumers.  Whether they go budget or luxury, Boomers tend to want the best.

7. Boomers like creature comforts. This fact, according to Malott, actually keeps Boomers from booking the exotic locales they profess to like. Day puts a slightly different spin on the issue. “A tent is OK,” she said, “but it better have a great view and great food. Even if you’re in the wilderness, luxury is being served a delicious meal without having to lift a finger.”

8. Boomers are time deprived. To get relief from their stressful schedules, Boomers vacation where they can do absolutely nothing but be pampered. Or they may go to the opposite extreme, choosing adventures that are physically or mentally challenging – or both.  When booking travel, Boomers also need time-saving devices.  They like 800 numbers, the Internet, videos and virtual reality because they offer convenience and interactivity.  Internet use is so common among Mature Traveler readers, editor Malott automatically lists website addresses along with phone numbers. Day pointed out that Boomers use the Internet more for information gathering than booking. “It’s human nature to want to feel connected to what you’re about to sign up for,” she said. However, she added, Boomers also like the freedom of not involving other people when they are exploring a subject. Their attitude is, “When I’ve decided, I’ll initiate the next move.”

9. Boomers will pay for luxury, expertise and convenience. ATM fees, nannies and bottled water prove Boomers are willing to pay for what they want.

Seems to me Baby Boomers are the perfect customer for the private aviation industry.  So how do we reach them?  We should concentrate on adding value to the process of buying experiences.  So…a Citation XLS or a Lear 45?

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When it comes to air travel today, no one enjoys it.

Is There A Better Way?

Watch the video below and give this alternative some thought the next time you think about using a commercial airline. This alternative would have enabled me to go to New York City and back within the same day.  Total travel time would have been roughly five hours instead of 18.  And it would have cost me less!

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Part 4 in a Series on Social Media and Business Aviation: Written In Collaboration with Jay Deragon

Over the past few weeks I have posted several articles on social media – the new method of communicating to the market. I am an admitted novice in the world of social media and technology, but my eyes are starting to open to the possibilities created when social technology and business aviation collide.

We have discussed the opportunity social media presents to fight the war the airlines have declared on general aviation by getting our message out in an unfiltered way.  We have also discussed social media as a means to increase our visibility to the market as well as to communicate with that market in order to innovate and better meet its needs on its own terms. All of these are game changing strategies.

So now I want to ask some what ifs!

What if there was a social grid or network built for the purpose of becoming the e-marketplace for private and business aviation travel solutions? What if this social network allowed, encouraged and facilitated the market to come together to aggregate a demand that is currently outside of the supply that  traditional channels of distribution make available to the market?

What if the market could then go to the suppliers of private aviation and request trips or routes of travel where individual travelers could buy seats, filling the aircraft, driving the price down?  Maybe the price would still not be as low as mass transit airline travel, but still would be much lower than today’s pricing of private aircraft flights.

What if travelers could input their travel profiles into the social grid in such a way as to speak to the entire market and to form affinities around common travel patterns? Would travelers be willing to share their travel  information with the market in a profile, sharing where they go, when and how often? Would travelers talk to each other about their travel needs if those conversations led to more new, innovative and efficient travel solutions than have ever existed before?

What if all air charter providers and small scheduled airlines (niche airlines) could input supply into the grid, including empty legs?  What if on-demand charters were quoted instantly so that the market had real time visibility to the solutions they need? What if all of these suppliers could participate on a level playing field and in a system that costs the users only when a transaction takes place?

What if the other parts of the business travel supply chain were able to participate as well? Would the hotels, resorts, rental car and limousine services have an interest in participating in the grid?

What if private aviation operators could collaborate to create a bigger market?  What if we woke up someday and realized that we’ve been monopolized by technology controlled by some organization that isn’t even in our business? What if we all created a new collective “social grid” in which the general market of travelers realized they could use our system rather than the old commercial system?

What if we could collectively reinvent ourselves as an industry with the aim of serving the larger market? What would be required? Who would agree to collaborate? Who would agree that if we don’t, someone else will?  And we’ll all lose when we should have been leading all along?

If we could simply start to build a dialog around all of these questions what could we do? Should we do it? If not, then let’s not even try to answer these questions.  Let’s keep doing what we’ve been doing. Einstein once said “insanity is doing the same thing over and over and expecting different results.”  What happens if we all decide to be sane?

If you think we need to do something else then join me and invite others to join us in creating a new future where we can all win.

Who will jump into the dialog? Who will invite others to do so as well? Is there anyone out there?

Where are the answers to all of these “what ifs”? Could they be out there in the market of conversations that could create the new system that creates the answers?

The answers are out there in the minds of people wanting to create a new future. Are you one of them?

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In previous posts I have  discussed the safety aspects of selecting an aviation services company when you want to charter a private jet.  Once you have satisfied any questions regarding the safety practices of the operator(s) you might do business with, the next step is to look at the available aircraft they have to offer. If you have a lot of choices then you want to pick the aircraft that best fits the mission requirements for the trip you are planning. Operators can give you the capabilities of their aircraft including seating configuration, non-stop range, speed, cabin size and amenities on board. They will also readily give you prices on your trip in each aircraft with flight times so you can easily compare the different options. Good operators are glad to talk with you and provide information with no strings attached.

If price is a factor, then you want to choose the aircraft that can do the mission most economically. Are you willing to ride in a turbo-prop aircraft? We use the term “private jet” a lot but our industry also offers safe, reliable and comfortable service in aircraft powered by turbine engines with propellers. Turbo-prop aircraft burn less fuel than most of their jet counterparts and, in most cases, cost less to maintain. This translates to lower rates to you on many trips.  Propeller aircraft are slower than jet aircraft; so, the distance of your trip will determine which is most cost effective.  For instance, if you are travelling from Santa Barbara to San Diego with four passengers, a King Air will run that one hour trip for you in a both cost and time efficient manner.  However, if you want take those same four passengers from Santa Barbara to Tacoma, the King Air will take three hours 45 minutes; so, you  might want to look at a jet.  The difference in speed makes up for the difference in hourly rate; so, for operators who charge by the flight hour rather than by the mile (and most operators do), the jet is going to be the most cost effective aircraft for the trip.

If you can’t get used to the idea that you can ride on an aircraft with propellers then there are still many jet options that can get you there efficiently. We will talk more in the future about the differences between jet and turbo-prop aircraft.

Even between jet aircraft there are things to consider when choosing the right one for your trip.  What is the seating configuration?  Is the lavatory enclosed?  Is there enough baggage space?  If you wanted a light jet for an eight passenger trip from St. Louis to Tulsa, you could use a Lear 35.  The aircraft has four individual seats, a seat on the lavatory and a three-person divan, which is a little snug, but for a flight of just over an hour, it could be done.  The Citation V aircraft is a little slower than the Lear, but also a good light jet choice.  I would comfortably recommend either aircraft for that trip.  However, if you took those same eight passengers from St. Louis to Las Vegas, I would recommend the Citation over the Lear.  The Lear is faster, but the Citation has individual seats, making the three and a half hour flight more comfortable.  Your charter operator will be happy to give you the advantages and disadvantages of the aircraft they have available.

If you have the time, and have not already made a visit to the airport, go take a look at the aircraft you might be using. Your prospective operator will gladly show you their aircraft and give you the tour. I have yet to meet a prospective client who did not enjoy visiting us at the airport and looking at aircraft. Hop aboard and sit in the seat you will be riding in. Get a feel for what it would be like on a trip.

Armed with a price comparison of different aircraft on specific trips and a first-hand feel for what the aircraft looks and feels like in the cabin, you are ready to go flying.

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