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Business class: Volume issue hovers over air taxi start-ups
By Rohit Jaggi
Published: November 7 2008 17:58 | Last updated: November 7 2008 17:58

The concept of air taxis has not got off to a flying start. The US service that had the biggest
ambitions, DayJet of Florida, had those lofty plans brought crashing down to earth by the credit
crunch and delays in aircraft deliveries. Of the 1,400 Eclipse 500 very light jets (VLJs) it
envisaged operating, the 28 it actually received are now being sold on by the manufacturer.

In western Europe, conditions are different. While roads are more congested, there are more
options for point-to-point travel, including fast rail services. And some, including the body
responsible for air traffic control in Europe, fear the system will not be able to cope with
sizeable fleets of four-passenger, twin-turbofan air taxis.

Meanwhile, the rapid deterioration in the financial climate has put a squeeze on conspicuous
consumption of private aviation services. One large operator calls the current sudden slowing in
business jet traffic a “pregnant pause”.

But others say the situation demands that companies pursue opportunities more aggressively,
and focus more clearly on choosing travel options that are efficient not just in cost but also in
time.

There is also evidence owners of large business jets are willing to slum it in an air taxi for
shorter hops, because the cost is more easy to justify. In addition, commercial airline schedules
do not often lend themselves to multi-sector trips in a single day.

Blink, one of the first European start-ups to use the air taxi model, is confident. It says its
decision to go with a per-plane hire basis, rather than the per-seat model that DayJet was so
confident would succeed, gives it an edge. But at the same time that model puts it close to the
traditional private charter.

Where the two models differ is that the air taxi start-ups hope to offer lower prices by achieving
higher utilisation rates of their expensive assets – the aircraft. Established charter companies
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expect to have their aircraft flying for about 400 hours a year. Blink is aiming at more like 800.
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The Farnborough-based company started operations in June, and has been operating with only Annual reports FT Newspaper subscriptions
one aircraft since. “It’s still very early,” says Peter Leiman, Blink managing director. “With one Market research FT Diaries
plane we can’t draw any definitive conclusions. But, that being said, in September we achieved Growth companies FT Bookshop
a utilisation rate that on an annualised basis would be 840 hours a year.” Corporate subscriptions FT Conferences
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Blink has opted for a single plane from an established manufacturer – the four-passenger Analyst Research The Non-Executive Director
Citation Mustang, from Kansas-based Cessna. There have been none of the delays and
technical issues that still afflict the Eclipse, the aircraft that the now-defunct DayJet chose,
according to Mr Leiman.

Two additional Mustangs arrive this month, then on average one more a month will be added to
the fleet over the next two years.

The Phenom 100, another new aircraft from an established manufacturer, has been chosen by
JetBird, which plans to launch next year from Germany. It has 56 firm orders and 44 options for
the four-passenger Phenom, made by Embraer of Brazil. JetBird expects its first aircraft in
April with, on average, two more a month to 2013.

Stefan Vilner, JetBird chief executive, is unfazed by the current economic woes. “The timing for
us is quite an opportunity,” he says. “We are going to launch quietly in 2Q 2009. If the cycle
follows the usual trends in the world, we’ll be launching in the upcycle.”

According to Domhnal Slattery, JetBird founder: “From an equity perspective, the balance sheet
is very healthy. We completed all of our equity financing before the dislocation in the markets.”

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 Financing for the start-up phase is key. “Forty to 50 aircraft are required for economies of
scale,” says Mr Slattery. “We assume we’ll get to critical mass in 2011.”

Mr Leiman says signs support the idea that air taxis could expand the whole market. “Some 60
per cent of our customers are private-jet-down users,” he says. “But 40 per cent are new to
private aviation.”

Some analysts are not convinced. “The last time I looked you need utilisation rates of at least
1,000 hours a year,” says Chris Tarry, who runs aviation consultancy CTAIRA. The arguments
for air taxis, he says, “clearly have merit. But are they going to have the volume?”

Price comparison shows how the air taxis fare

Air taxi operators, whether in business already or about to be, push the idea that using their
services can permit greater efficiency by allowing more meetings to be squeezed into one day,
especially in places ill-served by the airlines. Saving time by avoiding long check-in and security
queues when using smaller airports is another bonus.

But they also claim these benefits come at an attractive price. UK-based Blink says that if all
four passenger seats in its Cessna Citation Mustangs are filled, the cost is within 20 per cent,
up or down, of business-class fares on scheduled airlines.

JetBird, due to launch from Germany next year, is not giving away pricing details. But Domhnal
Slattery, its chairman, says fares will be “50 per cent lower than current incumbent legacy
players among the big charter companies”. That claim is echoed by Blink.

To test the pricing model, I asked Blink to quote for a flight today from London to Paris to
Stuttgart to Antwerp and back to London. Blink’s price, including all landing fees, was £5,049
($7,889). A total flying time of less than four hours would leave ample time for meetings in all
the destinations.

British Airways, when asked for fares to cover this flight, was flummoxed. I could leave
London early this morning, and get to Stuttgart, but the BA person was unable to find a way of
getting me from Stuttgart to Antwerp. “You’re going to need to get in touch with a private jet
charter company for this,” he said, unprompted. “You need a Lear jet, that’s what you need.”

The best BA could find in a business class, fully flexible fare would not get me back to London
from Amsterdam until tomorrow. It would also cost £1,199 per person. “And that’s missing a bit
in the middle,” as the good-humoured BA fellow put it.

A second attempt with BA got me to Brussels via Lufthansa late in the day, after a long stop
in Stuttgart. Catching the last flight to London left no time to do anything more than sprint
between aircraft.

As an alternative, I was offered a £120 four-star hotel room, and a first flight to London in the
morning. Either way, the cost in fares and taxes was in the region of £1,190 per person. That
comes to £4,760 for the same number of passengers you can fit into your own Mustang,

The Air France office was thrown into confusion by my request. Much putting on hold while
people in the office conferred, and a few false conclusions later, Air France came up with a
route that covered all the ground – to Brussels though not to Antwerp – but would keep me out
of London until Wednesday evening, the 12th. At a business-class cost of £1,130 per person, or
£4,520 for four seats.

But another factor may upset the pricing equation. According to aviation analyst Chris Tarry,
fares on regular airlines are falling swiftly.

Quotes for the same route from other aviation operators included £7,000 all-in using a Mustang,
the same aircraft as Blink’s, from air charter broker Oxygen 4. The broker also quoted £9,000
using a Learjet 45 super-light aircraft, and £14,000 for a Cessna Citation Sovereign super
midsize jet.

Business aviation specialist ExecuJet, meanwhile, quoted !17,200 (£13,890) for the route in a
Learjet 60, which can take six passengers.

To put all that in context, a flight from London to Larnaca in Cyprus, taking about the same time
as the total for the four-leg trip quoted above, would cost a NetJets customer about !18,700 on
a Hawker 800.

The Blink fare is close to that for four airline business-class seats – and enables a more
efficient day. But the average number of passengers on a business jet flight is only two –
booking a Blink Mustang and putting only two people on it would give a very different
complexion to the comparison.

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