Last week, more negative news out of Capitol Hill related to commercial air travel and the costs of delays in a report entitled “Your Flight Has Been Delayed Again” and released by the Joint Economic Committee (”JEC”) Majority Staff chaired by Senator Charles Schumer (D-NY) on May 22. At the beginning of the year, I discussed other statistics released by the DOT related to the costs of delays. According to the Schumer report, the JEC “used U.S. Department of Transportation data to analyze more than 10 million individual U.S. domestic scheduled flights in 2007. These passenger flights were operated by more than 400 different carriers – both national and regional – and traveled through more than 1,100 airports.” The statistics released in the Schumer report are mind numbing. Here are some of them (mostly quoted directly from the Report):
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Today’s Memorial Day edition of The Washington Post contains the latest in a series of articles highlighting the challenges faced in light of fuel costs and the economy for air taxis. Written by Kendra Marr, the article is entitled “Takeoff Turbulence for Air Taxis -Fuel Prices, Distressed Economy Create Head Winds for Start-Ups,” and includes some good information on Linear Air and a video clip.
The article, however, continues to make the fundamental mistake of many of those who don’t truly understand the greatest benefit of air taxis services is the personal time savings and choice. Here’s why:
There is a good article in yesterday’s New York Times discussing a number of US operators entitled “Air Taxis Fly Into Financial Turbulence.” It includes a discussion on Dayjet’s recent inability to secure another round of financing and its need for market expansion to obtain a critical mass for continued future operations. The most interesting part of the article confirmed that need for additional funding for DayJet’s sustainability:
A Flight International article has a great update highlighting some of the more than 16 different European air taxis operators who are flying now or plan on doing so by 2010. In an informative article entitled “Will the emergence of VLJs as air taxis transform air travel?” authored by Kate Sarsfield, it is clear that the European air taxi marketplace is far from being defined and in that way will be the similar to the US market: a wide variety of models and aircraft (at least initially). The article contains discussions about Blink, Bikkair, JetBird, Taxijet, AccelJet and Air Cab.
One of the most interesting statistics comes from Iceland’s AccelJet which claims “that charter movements at the capital’s airport in Reykjavik have grown by 4,000% since 2003, from 116 to 4,600 movements a year. There is a huge demand for business aircraft services within Iceland - serving remote locations - and from Iceland to other European destinations.”
With DayJet’s scale back announcement, I have been asked repeatedly what I thought and what this meant for the air taxi marketplace. I have also spent the past few days reading most of the news reports and analysts’ statements. Here is what I think, much of which has been stated in one way or another in previous posts this year.
This is an emerging market based on disruptive technology. It will take many, many years to define. There are multiple operators, multiple pricing models and multiple aircraft types - many of which we have not yet even seen in the sky. The free market will help define which combinations are the best models for the air taxi marketplace.
It’s a tough time all over for aviation. Economically, there could not be a more difficult time to start a new company and seek additional capital, especially in aviation. Fuel is at a historical all-time high price with no end in sight to its weekly increases. Major air carriers — most of whom have just emerged from bankruptcy — are racing to try to merge with each other to survive or they will likely face additional bankruptcy filings. At least four or five smaller Part 121 air carriers like Hawaiian Airlines have filed for bankruptcy and some of those like SkyBus will be liquidated. Traditional air carrier on time performance in March was the worst ever. On Tuesday, May 6th, the Wall Street Journal ran an article called “Flying Foul:Passengers Behaving Badly,” about all the foul habits of passengers on packed airline flights that we have all seen and experienced. The same day, the GAO released its report based on testimony before a U.S. House Subcommittee entitled,”NextGen and Research and Development Are Keys to Reducing Emissions and Their Impact on Health and Climate.” However, a few months ago, the federal rule proposing the implementation of NextGen and ADS-B was met with an overwhelming barrage of industry and political opposition in DC. The FAA has no confirmed Administrator and as of yesterday, the FAA Funding Bill was stalled once again in the Senate.
We are still at the infancy stage of the “crawl, walk, run” transition of air taxis. There are indeed a few positive indicators. The back orders and demand for all sizes of new aircraft from Airbus 380s to vljs are breaking records. The aircraft are coming and people still want to fly. The time for the true measure of success or failure of the air taxi marketpace is likely five to ten years away.
It has been a while since I have discussed the status of European operators, but an article in Time magazine recently highlighted the efforts of both Blink and Jetbird. The article entitled “Private Jets: Air Pressure” discussed again the projections about the number of vljs operating in Europe in the future and how that might impact airspace traffic and congestion - especially at the higher altitudes where fuel efficiency is the greatest.
Blink, which will be flying the Cessna Citation Mustang, and Jetbird, which has chosen the Phenom 100, are both discussed in the article. Based in Dublin, Jetbird’s website is still calling for a 2009 launch while Blink — claiming to be Europe’s “first air taxi service” — with its headquarters in London has indicated it will begin operations this month. The article also discusses a concern of Eurocontrol with the potential adverse impact of vljs (that I discussed here a few months ago):
It notes that “[i]n October, Eurocontrol will conduct a simulation in Budapest that will flood air-traffic control with hundreds of microjets. If the test suggests that the safety of larger planes could be compromised, Eurocontrol may push regulators to mandate dedicated flight paths and better collision-avoidance gear.”
My sense is that ultimately the European market and customers for air taxis are somewhat different from that in the US with much greater initial attraction to leisure and vacation travel in Europe in addition to business travel. It will indeed be interesting to compare the two markets as they emerge. While there might be quite a few differences, one thing is the surley same: the common themes of improvements in quality of life and efficiency and renewed enjoyment in air travel are shared by both current US operators and prospective European operators.
I have — since I flew my first flight on SATSair — been a significant proponent of the company. Serving primarily the Southeast and based in my home state of South Carolina, SATSair has just released a press release of some rather impressive numbers for 2007 and the first quarter of this year. I attribute that success to a number of factors: reliability, excellent customer service, a fleet of Cirrus aircraft, a simple “air cab” pricing model, and a geographic reach in the weather-favorable Southeast. Ironically, while today’s headline article entitled “Rising Costs Reshaping Air Travel Across the USA” in USA Today lamented the probable decrease in availability of commercial flights,especially to smaller airports, and noted how fuel prices continue to add to the commercial air travel woes, the SATSAir press release states they are actually seeing more use as a replacement of traditional hub and spoke service. Here are some quotes and highlights from the press release:
* “SATSair experienced more than 60% growth in the number of flights from 2006 to 2007.”
* The air cab operation flew more than 16,000 flights and landed in 27 states in 2007.
* SATSair ended the year with over six million passenger miles flown since the company’s inception in November 2004.
* The most noteworthy year-to-year growth took place in Florida, which saw a 314% increase in flights over 2006.
* Though Florida showed the most notable growth, every state SATSair flew to in 2007 saw an increase in flights from the previous year, including considerable growth in the company’s core six-state region.
* SATSair’s headquarters is located in South Carolina which had an average of 3 flights per day into all the major economic centers such as: Greenville, Anderson, Spartanburg, Charleston, Beaufort, Hilton Head, Columbia, and Myrtle Beach.
* Just as importantly, of 60 public use airports in South Carolina, SATSair landed in 47 of them, providing the start of an effective South Carolina Intrastate Air Network.
* Traditionally, the use of the air cab service has been a remedy for driving trips of 2-5 hours, not a replacement for other forms of air travel. However, 2007 saw a shift with a significant number of new SATSair customers using the point-to-point air cab operation as a solution to their hub-and-spoke airline frustrations and woes, in fact decreasing the door to door travel times.
* Nearly 90% of the company’s business for 2007 was in a six-state region, comprised of Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.
* SATSair currently serves more than 600 airports throughout the Southeast.
* SATSair’s mission is to provide safe, convenient, economical air travel and top-notch customer service.
This is an incredibly tough time for anyone in the aviation business. However, SATSair’s success is an affirmation of a simple business precept that if you reliably provide a quality product, you will grow and experience repeat business. It also is an affirmation that the SATSair air taxi - or “air cab” model as CEO Steve Hanvey insists it be called — is growing at rather significant rates while the traditional air carriers are likely merging, consolidating and shrinking.
A strong group of aviation professionals with significant ties to JetBlue formerly announced the creation of JetSuite in a press release yesterday. Led by Alex Wilcox, one of the original founders of JetBlue and later the COO of Kingfisher Airlines, JetSuite plans to operate Phenom 100s in a managed owner aircraft model concept. JetSuite plans to serve the West Coast and start by early next year.
JetSuite has an order for 50 Phenom 100s and options on an additional 50 Embraer aircraft. It will be the largest US operator of the Phenom aircraft. Speaking of large, the Phenom 100 is one of the largest of the new vlj models. The Embraer website has a great cross sectional comparative analysis of the Phenom cabin comparing it to the Eclipse 500, the Mustang, the CJ1, and the (potentially soon to be resurrected) Adam 700.
More details about JetSuite’s plan are available on its website which has been up for some time. Here is some additional information:
The press release states that Wilcox is “joined by several former JetBlue founding colleagues, including Usto Schulz, JetSuite’s Vice President Certification and Safety, who was Vice President, Safety for JetBlue and was with the Federal Aviation Administration for 17 years, and Amy Curtis-McIntyre, former Vice President of Marketing at JetBlue who is consulting on JetSuite’s brand and product. Also, Ken Burnham, former Fleet Captain for the DC-10 at United Airlines, has joined JetSuite as Vice President, Flight Operations.”
The JetSuite concept appears to be an innovative air charter management and owner/operator operation. While the aircraft are not being utilized by the owner, their “care and feeding” and charter flying will be handled exclusively by JetSuite.
The website states: “As a JetSuite owner, you are given a set number of hours to use per year for free. If you need additional hours, you can purchase them at a discount to our retail rates and significantly less than other offerings. . . . In exchange for placing your aircraft in the JetSuite fleet, you receive JetSuite’s premier management service at absolutely no additional cost. While our competitors charge you a monthly maintenance fee, our comprehensive program includes aircraft maintenance, hangaring, pilot training, arranging flight plans and flight crew, and much more at no cost.”
JetSuite’s choice of the aircraft, business plan and charter concept is surely worth watching as there is no doubt with respect to the depth of the aviation experience of its management team.
I spent a large part of last week at the NBAA Maintenance Management Conference in Florida where I had the honor of appearing on the agenda to speak on maintenance risk and legal issues both from the litigation and regulatory perspective. As always, NBAA put on a great conference. In preparing for my comments, there was needless to say a wealth of relevant news and information on maintenance issues involving Part 121 air carriers. I also was aware of the testimony of Department of Transportation Inspector General Calvin Scovel (29 year Marine Corps veteran) as he had several opportunities to appear before congressional committees in the last few weeks.
On April 10, he spoke before the Senate Committee on Commerce, Science and Transportation, Subcommittee on Aviation Operations, Safety and Security. His comments were entitled “Key Safety Challenges Facing the Federal Aviation Administration.” The April 10th testimony focused on “the key actions that FAA and its stake holders will need to address over the next several years. These included (1 ) strengthening FAA’s oversight of the aviation industry, (2) improving runway safety, and (3) addressing attrition in two of FAA’s critical workforces–air traffic controllers and aviation safety inspectors.”
One week later, on April 17, 2008, the Inspector General testified before the Senate Committee on Appropriations, Subcommittee on Transportation, Housing and Urban Development, and Related Agencies. His comments, many of which were repetitive, were entitled “Key Safety and Modernization Challenges Facing the FAA.” They focused on “(1) strengthening FAA’s oversight of the aviation industry, including its systems for monitoring air carriers’ use of outsourced maintenance and aircraft manufacturers’ suppliers; (2) keeping existing modernization programs on track, reducing risk with NextGen, and setting realistic expectations; and (3) addressing attrition within FAA’s air traffic controller and inspector workforces.”
The IG’s discussions in the April 17 testimony with respect to the importance of NextGen including ADS-B implementation (”a new satellite based surveillance system that has the potential to enhance safety and capacity”) are very relevant to the air taxi industry. I have previously discussed the importance of NextGen.
However, with maintenance compliance in the news and the reliability of aircraft components always an issue, I wanted to highlight the IG’s discussion on the FAA’s oversight - or lack thereof - of the suppliers to aircraft manufacturers. Earlier this year in February, the DOT IG issued a report entitled “Assessment of FAA’s Risk-Based System for Overseeing Aircraft Manufacturers’ Suppliers.” Many of the comments about suppliers in this month’s testimony were based on the findings of this earlier audit report. Here are some insights as to current matters related to aircraft component suppliers that I thought were relevant to Part 135 and 91 operators, many of whom are utilizing new aircraft:
* FAA’s current oversight of aviation manufacturers is based on a system that assumes the manufacturer has primary control over the production of their aircraft rather than trusting suppliers to design and manufacture a large portion of the aircraft.
* “FAA has not ensured that manufacturers are providing oversight of their suppliers. Manufacturers are the first line of defense in ensuring the products used on their aircraft meet FAA and manufacturers’ standards.”
* “FAA does not require inspectors to perform audits of suppliers to determine how well manufacturer’s quality assurance programs are working.”
* In the last four years, FAA “has inspected an average of 1 percent of the total suppliers used by the five major manufacturers [DOT] reviewed.”
* At FAA’s current surveillance rate, “it would take the inspectors 98 years to audit every supplier once.”
* The DOT observed “systemic deficiencies” at the 21 suppliers it visited. “For example, nearly half (43 percent) of the suppliers had deficiencies in their tool calibration and employee training programs. Deficiencies in these areas could impact the quality of the parts of these suppliers.”
One of my presentation “take-aways” was the importance of due diligence in outsourced maintenance in that although you can outsource the work, you cannot outsource the liability and ultimate responsibility for FAA compliance. That remains with the certificate holder and aircraft operator. With respect to component manufacturers and suppliers, I thought these comments on supplier oversight were somewhat noteworthy and relevant to Part 135 operators — most of whom’s business plans include new aircraft with a large number of components provided by outside suppliers.
In 2001, James Fallows published in hardback “Free Flight, From Airline Hell to a New Age of Travel.” In 2002, he toned down the title of the paperback release to “Free Flight, Inventing the Future of Travel.” I suspect the majority of the traveling public the past few weeks would think the original title was more appropriate. Regardless, I have posted before about James Fallows’ book and Dr. Bruce Holmes and how what is happening today in the air taxi and on demand market with Cirrus and Eclipse aircraft was forecast by these gentlemen many years ago and discussed in Free Flight.
Fallows made a trip to DayJet earlier this year and took a flight with his fellow visionary, Bruce Holmes. He has written the most recent and detailed article to date in the mainstream press on DayJet which appeared in Atlantic Monthly’s May edition. It’s now available online. Entitled “Taxis in the Sky,” the article traces DayJet’s research, start-up, growth and development. It also includes Fallows’ description of his recent flight with Holmes. The online article includes Fallows’ photos of his trip.
There is a lot detail in the article and it’s written by Fallows, so it’s a good read. There are a couple of simple observations that Fallows makes. Here is my favorite excerpt about the simplicity and convenience of the air taxi service:
Fallows states: “[O]bjectively, this is a comfortable and convenient way to travel. You go to the airport, which, because it’s small, is less congested than ones you’re used to. You walk to the DayJet counter, which resembles a rental-car booth. There’s probably no line, because probably no one else is going at just this time. As you step up to the counter, a trapdoor-like device measures your actual weight while the attendant asks to weigh your bags. (On small airplanes this is important, for instance in determining where to place the bags.) A minute or two later, you walk out to the plane, and a minute or two after you’re seated, it taxis and takes off.