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Special Report: Aviation

Blink Wings It
Vidya Ram, 06.03.08, 6:00 AM ET Peter Leiman and Cameron Ogden With oil skirting $130 a barrel and demand for business-class travel slowing, its not the best time to launch an airline. Or is it? Peter Leiman and Cameron Ogden, two Harvard Business School graduates, think it could be. They're launching Blink, Europe's first air taxi service, on June 12. "We are half the price of the private jet market and fully competitive with business-class fares on British Airways," Leiman said. Blink is marketing itself as a black cab (London taxi) on wings. Well, almost. Customers won't quite have the flexibility of private jets, which take customers "to anywhere and from anywhere" at a time of their choosing. Instead, it will follow the model of airlines such as Florida-based DayJet, which operates within a network of destinations within the state, tailored according to the needs of the companies. Special Report On Aviation: The Sky Is Falling For Aviation, A Turbulent Time Fuel Expense Isn't The Crisis Who Profits While You Wait? Flexibility comes at a price, according to Blink, as private jets pass on the cost of so-called deadhead airtime (when the aircraft flies between destinations without any passengers) on to its customers. Blink is hoping this is a cost that cash-strapped companies would like to avoid.
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At the same time, it's a step up from regular business-class travel. Blink will Green Skies Forever design its schedule around the needs of The Little Airlines That Can't customers, meaning that businesses can Fighting Over The Nuts And arrange for regular flights between destinations at a time of their choosing. Bolts Though the tickets are up to 25% more expensive than regular business-class travel, customers can avoid the long commute to airports such as London's Heathrow, as well as the work time lost

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from inefficient scheduling, while the four-seater plane could act as a "boardroom in the sky," according to Blink. "We had to introduce operational constraints into the model," said Leiman. "If you have a 'from anywhere to anywhere' approach, costs will spiral, prices will have to be higher, and you lose the opportunity to bring people up from commercial business class to the air taxi." Leiman and Ogden's idea emerged two years ago, when the first light jets (VLJs), like the Cessna Citation Mustang and the Eclipse 500, began to appear on the market. Their capital costs were about 15% less than the cheapest jet engines on the market, and operating costs were 30% lower. "We saw the power of the jets as a disruptive technology. We believe it had an ability to change the way people travel," said Leiman. An initial case study with Wal-Mart (nyse: WMT - news - people ) proved fruitful, and the pair found that the retailer, which has the world's largest fleet of corporate aircrafts, could save around 25% on its existing travel budget and make it cost-effective to put employees earning less than $50,000 a year on the planes. "If a company such as Wal-Mart, known for its low-cost approach to business, could use the aircraft to save money and get employees to do more with their time, we knew there had to be opportunities for other companies to extract value," said Leiman. It's not just wishful thinking. So far Blink has attracted $30 million in investment and has ordered 45 of the four-seater Cessna Citation Mustangs. It also has three senior captains from British Airways (other-otc: BAIRY - news - people ) on board. One lingering concern: the demand for business-class travel is waning. British Airways' latest annual figures showed signs of a decline in demand for short-haul premium travel. Last week, data published by the International Air Transport Association revealed the sharpest monthly decline for first- and business-class passengers As for the impact of prices, Blink has not disclosed its hedging against further rises in the price of fuel, though like other smaller airlines, it's likely to have minimal cover. Still, Leiman said his planes are light and highly fuel-efficient, meaning fuel costs are less of a problem than they are for airlines like British Airways, where fuel accounts for around a third of total costs. "A 747 at Heathrow Terminal 4 burns more fuel taxiing to the end of the runway than one of our aircrafts do traveling between London and Nice," Leiman said. With oil prices becoming a huge bane for the aviation industry, Blink's fuel efficiency could be its biggest asset. Earnings Pain On Euro Gain Stocks Hold Despite Airline Woes

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