LINEAR AIR: A Bright Array Of Big City Flights
By Elliot Borin, Air TaxiFlights.com
Founded in 2004 and headquartered at Laurence G. Hanscom Field (BED) in Bedford, Mass. with additional operating bases at community airports in the metro N.Y. and Washington, D.C. area, Linear Air is not your typical VLJ air-taxi operator.
For one thing, it utilizes its mixed fleet of eight-passenger Cessna Caravan piston-engined aircraft and three-passenger Eclipse 500 VLJs pretty much interchangeably despite the wide speed and capacity discrepancies separating the aircraft. Also, the fast-growing carrier, which has 12,000 potential passengers in its database and serves about 500 Northeast airports, doesn't offer per-seat pricing and claims to match full-fare airline coach -- rather than business or first-class -- costs for three people flying certain routes on tight schedules.
Perhaps most unusual among current VLJ air-taxi operators, Linear does not subscribe to the conventional wisdom that the new generation air-taxi business model should focus on direct travel between second and third-tier markets that aren't adequately served by major airlines.
Not so, says Linear's founder and CEO William Herp, a Harvard MBA holder with a substantial history of successfully launching entrepreneurial technology companies. According to Herp, the easy pickings in the air-taxi market are to be found not in the boondocks, but among the millions of travelers who have business interests in secondary and tertiary markets but live and work within the shadows cast by jumbo jets flying in and out of international airports. Recently asked Bill Herp to tell us a bit more about Linear's unique approach to its business.
AirTaxiFlights.com: Why Linear? Did someone accidently leave out the "i" in Lineair when you filed the incorporation papers?
Bill Herp: It's amazing how many people get confused by that. The truth is we chose the word "linear" because a straight line is the shortest distance between two points. We thought that perfectly fitted the premise of the air-taxi industry, getting people from where they are to where they have to be in the most expeditious manner possible. ATF: Fair enough. I suppose there was an equally logical reason for starting service with Cessna Caravans rather than Cirrus SR-22s, Beech Bonanzas or other small commuter-type aircraft.
Bill Herp: Back in 2004 when we started we had a pretty good idea what the capabilities and operating costs of first generation VLJs would be and we were looking for a suitable platform to test and build credibility for our business model, customer acquisition strategy, and technology aspirations . It was my partner and Directory of Operations Michael Goulian's idea to get started with the Caravan because it costs about the same to buy and fly (on a per mile basis) as an Eclipse 500.
There are significant differences, of course. The Caravan seats eight and only goes 160 knots per hour, but one of the things we discovered that seems to be consistent with most small aircraft, including VLJs, is an average passenger load of between two and three people.
This means that our Caravans were carrying about the same number of passengers per flight as we expected on the Eclipse. So we felt the customer profile -- the demographics of the passengers, so to speak -- we were getting with the Caravans would also be appropriate for the Eclipse, which just happens to be the most economical, fuel efficient and environmentally sensitive business jet ever built.
ATF: You've frequently been quoted as saying that two or three people flying together can use Linear for about the same price as flying full-fare coach on a scheduled carrier. Everyone else in the air-taxi industry always compares their fares to same-day or 24-hour advance first- or business-class fares. What makes you think you can compete with coach fares and still fly at a profit?
Bill Herp: At the end of the day, unrestricted coach is not that different from first or business class on certain lightly traveled routes like Boston to Elmira, suburban New York to Columbus, Boston to Toronto ... trips like that. The last business I launched was e-Dialog, an online marketing technology services company that worked with really big companies which would frequently call and ask us to put a team -- a sales person, customer service rep and tech support expert -- on a plane to, say, Cleveland "right now." So we'd hang up the phone, call our corporate travel agent and buy three coach tickets ... because that's generally all you can get from Boston to Cleveland on short notice. And those might cost us $3,000 and our people might not be able to get back the same day, which would add even more to the cost. Or we might only be able to book flights with connections, which leads to all kinds of other potential problems with making meetings on time. Those trips for three could -- and frequently did -- tote up to $4,000. It was absolutely no problem for it to get that high.
So it was somewhere during that period that it occurred to me that there was a big opportunity in efficiently and economically connecting people who live and work near major metro areas with their business interests in secondary and tertiary markets .
ATF: How does Linear's model differ from per-seat carriers like DayJet?
Bill Herp: The DayJet model is more geared to linking people in secondary and tertiary markets who would otherwise be driving. Our model calls for operations in major markets where there are a significant number of business people paying unrestricted full coach fares to get to second and tertiary markets.
Based on our market research we feel that's where the big VLJ opportunities are, where the low-hanging fruit is. There are 16 million such passenger seats sold each year for trips within a 500 mile radius of New York. Trips which either initiate or terminate at a second- or third-tier airport.
ATF: You mentioned 500 miles, is that kind of a sweet spot for your customers?
Bill Herp: Actually, we've found that the sweet spot is related to time, not mileage. It's turned out to be 90 minutes, about 250 miles for the Caravan and 500 miles for the Eclipse.
ATF: Any chance you'll be adding per-seat pricing as you expand?
Bill Herp: For the foreseeable future, the answer is no because of FAA regulations prohibiting VLJ air-taxi operators from offering that type of service on a scheduled basis. Part 135 turbojet operators offering pay-per-seat service are not allowed to tell passengers exactly when they can leave, the best they can give you is, I think, a two-hour window. That makes it very difficult, if not impossible, to fill vacant seats on an ala carte basis.
ATF: Among other things, that would seem to negatively affect pricing flexibility. DayJet, for one, planned to offer fliers lower rates if they were willing to make a stop or two between their city pairs. But it would seem that selling those empty seats at the intermediate DayPorts would be difficult if you couldn't promise a reasonably firm departure time. Not knowing within two hours when their air-taxi would be ready, might cause a lot of people to opt for a 60 or 90 minute struggle through a major airport.
Bill Herp: That's very true. Regulations do not allow you to say we've got four flights departing from Teterboro at 10 am and sell individual seats on them. Which is the number one reason I wouldn't feel comfortable offering per-seat pricing under today's rules.
The other reason has to do with the "hanging fruit" analogy we talked about earlier. There's so much lower hanging fruit ready to be picked. Not only among travelers paying air-taxi equivalent prices to fly on scheduled airlines, but by introducing people who are currently flying a Lear or a Citation or even a King Air to the lower-cost, more flexible option presented by VLJs.
ATF: Seems like picking fruit productively, whether it's peaches or passengers, requires some kind of method. You talked about testing your customer acquisition model, what exactly is that? How do you recruit passengers when you expand into new markets?
Bill Herp: To a degree, that's part of our secret sauce. In general terms, we use some very sophisticated database analysis tools and online research techniques to identify people and companies we consider to have the highest lifetime value as customers and reach out to them with various direct marketing approaches.
ATF: What percentage of your passengers are repeat customers?
Bill Herp: I don't think that's the right question. Because we're expanding very rapidly and marketing very aggressively, we have a constant stream of new customers who make up the bulk of our passengers.
I think what you're really asking about is retention rate, how many of our first-time passengers become second and third-time passengers. And that number is extremely good. Fully two thirds of the people who have flown with us once have become repeat customers.
ATF: Your published growth projection is 300 aircraft serving 15 markets in 2012. With that less than four years away, do you see any problems in reaching that goal?
Bill Herp: Not really. I think the throttling factor for VLJs in general is going to be the ability of the manufacturers to delivery enough units to satisfy demand, but that shouldn't affect us between now and 2012.
ATF: What about adverse regulation or air traffic corridor congestion. Critics, especially "researchers" funded by the airline industry, have made some pretty outrageous and dire claims about the effect of "swarms of VLJs" taking to the skies.
Bill Herp: There won't be any swarms. Total VLJ production over the next ten years will be an almost statistical wash in terms of adding to active aircraft totals when you subtract the number of larger business jets and piston-engined planes that will be decommissioned or relegated to infrequent service by VLJs.
Also, the whole point of the VLJ is to allow a segment of the flying public to avoid the major airline corridors and hubs where there are obvious congestion problems. That's what flying directly from where you are to where you need to be is all about. So to that end, the emergence of VLJ Part 135 carriers should make the major air corridors less crowded and even safer than they are now.
That said, I think we should have ADBS. I think we should fund airport improvements. I think we should have all the modern technology we can get. To the extent that all this doom and gloom rhetoric is designed to foster investment in the national airspace system, I'm all for it.
But the idea that air taxis are going to darken the skies and cripple the air traffic control system? You know, I just don't see that happening.
On that subject, I just go back to what my chief pilot told me not long ago: I don't know about you, Bill, but when I look out the cockpit window I hardly ever see an airplane.
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