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.

People are accusing Google of using it’s vast coverage and near universal brand to take unfair advantage of the “search and sell” industrial complex.  When people type in; “San Diego to Charlotte Flights”, Google instantly provides the cheapest  flights for that search criteria.

Google also provides a handy link for “more Google results…”  After that, lesser aggregators such as Expedia and Kayak appear lower on the page. Of course, the vanquished can pay Google a fee for the benefits that any advertiser would gain…

Who is anti-competitive against whom?

So is Google engaging in anti-competitive behavior, after all, they are both the judge and the jury on who shows up where on your screens? Well, maybe not, all they are doing is “intercepting” general search inquiries with their own products.  It’s awkward, but not necessarily illegal or anti-competitive since Google provides links directly to the airline site and does not book the seats on their own site like Expedia or Orbitz.

On the other hand, airlines pay travel sites 11 dollars for a booking that would otherwise cost them only 1 dollar through their own site – they prefer the Google hit over the travel site hit.  Furthermore, travel booking sites rely on Google for 20% of their business so any slide in ranking means real money is sliding down with it – so they hate it.  The airlines love it because it gets the traveler off the third party sites where stickiness is a rumor at best. All of this friction is worth 17 billion dollars per year – friction removed from a system is obviously in the best interest of the consumer, Right?

Ref Google’s Flight Search Sparks Antitrust Fears |.

The thing that everyone is missing is that none of the current players in online travel agency businesses are aware of a significant opportunity within the private aviation space.  The Google quotations are made on a dollar ranking not a “Time/Service” metric.  It remains extremely easy for an airline to game the ranking by hiding fees outside the fare quotation.  It is also easy for the airline to underprice a few seats to pull the customer on to their site where they block out the better seats.

So, what is the opportunity are we talking about in private aviation at Social Flights?

1. Aggregating open seats available on more than 15,000 private aircraft flying everywhere
2. Making these seats available and transparent to the public for purchase as an alternative to the broken and anti-social commercial air service
3. Enabling fliers to self aggregate and for direct flights from communities with no service to destinations they have in common
4. Lowering the cost of private aviation by selling unused or under utilized assets, open seats

An airplane moves people and connects them with other people and things.

The internet connects people and moves things.

Airplane operators know that using aircraft can be an expensive proposition. Use of the internet is free. If you combined something expensive with something free what happens?

Do Private Jet Operators Understand The Implications?

There has been a saying in the private jet business: If you have to ask the price, you can’t afford it. People who use private jets generally haven’t hunted for the best prices because it’s a status thing. These two statements used to be foundational truths in the private aviation business. But things are changing.

There are a finite number of wealthy people and/or corporations who desire to own or use a private jet regardless of the cost. Most charter operators have chased all the wealthy people for a sale so operators end up chasing the same customer over and over. Even the wealthy are feeling the economic pitch and shareholders are questioning the cost of and need for private aircraft.  Now charter operators are being pressured to justify and lower their cost. Cost has become transparent thanks to the internet.  Yet most operators do not fully understand the implications of transparency and social technology on old business models and methods.

What Are The Implications?

Business travelers and affluent individuals are becoming disenchanted with commercial flights, crowded airports, flight delays, and inconvenient schedules. These travelers are looking for alternatives to save time and reduce the hassles of commercial air travel. So they go to the internet to examine private aviation alternatives. What do they find and see?  At most, Web.1.0!

When you do a search for “private jets” or “private aviation” what comes up on the first page are listings of jet brokers (those that don’t operate or own any jets). You also see lots of references to “cost per hour, fractional jets and a host of other terms that are foreign to buyers”.

So let’s say someone decides to click on any of the links. They end up on a static web page with pretty pictures of expensive jets and self- proclaimed accolades of how great this company is then an 800 number to call for a quote.

So if someone looking for an alternative to commercial air travel hasn’t already lost interest in their search then the next step is to actually make a call. Then someone answers the call and begins asking questions to the caller of which the caller has no idea what they are talking about. Not wanting to sound stupid the caller fakes their way through the dialog expecting to get a quote at the end of the call. Instead the broker/operator says “can I have your email or number so I can get back to you?”

If the buyer agrees it then takes the broker/operator at least half a dozen phone calls, faxes, or emails, before you can get a charter estimate which may or may not be correct. Then the operator/broker emails you the quote of which has so many disclaimers and its format doesn’t make any sense to the buyer. All this, and you have not boarded the plane yet.   Besides that all he buyer wanted to know is what is my seat cost and what I get for it.

By now operators are reading this saying “You don’t understand our business model, we don’t sell seats we sell jets”.  To which I would say “I know but every jet has a certain number of seats and the total cost is represented by a cost per seat, full or not.”

Broken Business Models

According to a Forrester’s recent report, there are about 53.8 Million socially engaged eBusiness travelers in the United States alone. A new market opportunity for private aviation. It’s all about the passenger – they have the money.

Certainly not all 53.8 million business travelers would consider private aviation as an alternative travel option. But let’s say 1% would which means 53,000 potentially new customers.

The private aviation industry couldn’t imagine having 53 thousand new customers because their mindsets are frozen in old business models and expensive archaic operating processes.  Today’s charter revenues barely cover the aircraft management and operational costs, and almost never reach levels necessary to cover an aircraft’s cost of ownership. At the same time in the charter world an aircraft flies empty 40% to 60% of the time.  What a waste!

It is time for a revolution in innovative private aviation business models if the industry wants to capture the significant growth opportunity fueled by demand from disgruntled business travelers looking for viable alternatives.

Old mindsets are saying “You don’t understand how we operate”. My response is “You don’t understand how to change the way you operate”.

-Ralph Waldo Emerson “Who you are speaks so loudly I can’t hear what you‘re saying.”

Stay tuned for “What Would Jet 3.0 Look Like?”

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Alfie Kohn, author of  No Contest:The Case Against Competition writes:

Noncooperative approaches . . . almost always involve duplication of effort, since someone working independently must spend time and skills on problems that already have been encountered and overcome by someone else.

Sound familiar?  Look around and in almost every industry you see competitors beating each other into the ground while reducing the end value to the customer and increasing cost.

Julie Browser, of IBM writes “The traditional concept of business as a “winner takes all” contest is giving way to a realization that in the networked economy, companies must both co-operate and compete. Termed “co-opetition,” this new perspective requires companies to create business strategies that capitalize on relationships in order to create maximum value in the marketplace.

“Co-opetition”– a model in which a network of stakeholders co-operate and compete to create maximum value — is one of the most important business perspectives of recent years. Internet and mobile technologies have made it even more necessary for companies to both co-operate and compete, by enabling relationships through information sharing as well as integrating and streamlining processes.

In today’s networked economy, co-opetition is a powerful means of identifying new market opportunities and developing business strategy.

Take the private aviation industry.  Everyday thousands of private jets fly empty. Those who charter jets pay the round trip cost of a jet whether they use it round trip or not.  The process creates what is known as “empty legs”. Empty legs are usually one way trips flying empty and yet already paid for by somebody.  Most Private operators try and sell the empty leg at full charter prices and thus few ever sell an empty leg.  Empty legs represent seats unused leaving revenue in the air.

What if these private jet operators shared all their empty legs with the public and sold seats on those legs?  By cooperating they would expand their markets, create value for consumers and generate more revenue.  But many won’t do that because they view themselves as competing with each other rather than cooperating.  In the meantime revenue is lost to the air. In this case they end up doing less alone rather than more together.

Business is both competition and co-operation

In the past, people saw business as a “winner takes all” or “zero-sum” game. The networked economy moves away from these purely competitive plays to recognize cooperative relationships that leverage value created by those in the network. Competition — the other aspect of co-opetition — occurs after businesses have created new value in the market and expand the value proposition through quality and creativity.

Social Flights business model is about creating cooperation with private jet operators with the aim of expanding the market and creating new value for all parties involved. For it to work the suppliers must cooperate in order to gain increased market share through new value offered to travelers who in turn create new revenue.

So, will you consider cooperating?

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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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Photograph by: Chris Ware, Getty

Bloomberg and Associated Press report that June 2010 airline traffic rose 2.3% over June last year with US airlines carrying 65 million passengers. Annualized that comes to 780 million passengers. DOT projections say we will hit the 1 billion annual passenger level in the US in about 10 years.   

In spite of low customer satisfaction with airline service, people keep coming back for more. If you listen to all the grumbling you would think that, surely, travelers have had enough.  

The need or desire to travel must outweigh the pain of going to the airport and flying by airline.

People don’t like to fly the airlines but they keep doing it and the numbers are growing.

People love to fly in their own aircraft, ride in the back of a business jet or even a prop aircraft on their own schedule, and without the hassle of airline system,  but our industry languishes in this economy.

What is wrong with this picture?

It seems that price outweighs most considerations for the masses when it comes to travel.

Wouldn’t we all rather ride in a private jet if we could do so for the price of a Southwest Airline ticket?

How do we move a very small percentage of the market of travelers over to our side of the game?

It would only take a very small percentage of those 780 million annual passengers to radically change the fortunes of business and private aviation from manufacturers to service providers to the operators of the aircraft.

Move a few percent of the market share of travel to business and general aviation and, suddenly, the world looks a lot brighter for those of us in this industry.

I see a lot of effort being put forth; but, mostly, the efforts are in their own silos. I don’t see a lot of effort as an industry working together to solve the problem. There seems to be a general acceptance that it is what it is and that the situation on a macro level is not going to change quickly anytime soon.

It is worth thinking about to see if we can come up with solutions, isn’t it?

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If you do then something is wrong with the airline system or your employees.

I will vote for a broken airline system.

Thinking about a recent NY Times article by Lisa Galst entitled “Rewarded for Flying Coach” makes me smile as I write this.

What is the world coming to when you have to pay your employees extra for the misery of riding in the back of the aircraft in the cheap seats as opposed to booking the more comfy seats up front? Sounds like hazardous duty pay to me.

I have never heard any of our clients having to incentivize their employees to take a flight on a private aircraft. In fact it is sometimes the other way around. Last week when talking to one of our good clients he was telling me that he uses the flights he books to see his clients as a morale booster for his employees. Those who travel with him are excited about the experience and when they get back to the office everyone else hears about how cool it was.

With all that is happening in the airline industry:

• reduced capacity resulting in high load factors which equals crowded airplanes
• oversold flights and increases in denied boarding
• cancellations due to the new tarmac rules
• a la carte fees for everything the ticket no longer buys you

Is it any surprise that people just don’t want to do this anymore?

And the federal government has the idea that they can step in and solve the problem with legislation to make it against the law to provide bad service.

Private aviation and business aviation are sitting on a gold mine of opportunity.

What if these companies took the money they are spending to incentivize their employees to fly coach and used it to fly more in private aircraft?  They would get happier employees and gain a lot of productivity by not sending them through a hub that is cheaper to save a buck. Besides, with business aviation there is no such thing as routing through a hub. Its all point to point.

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