Taxiing for take-off

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Despite the economic woes that have pummelled the aviation sector in the past 18 months, a handful of air taxi pioneers are clinging on with grit and fortitude.

These evangelists are determined to prove that their revolutionary brand of low-cost, high-utilisation, very light jet-based air transport is the solution for Europe's cornucopia of disgruntled travellers who are seeking an alternative to the inflexible airlines and costly traditional charter providers.

A number of air taxi start-ups have not been so fortunate. Not long after this fledgling yet bustling industry catapulted on to the European stage in early 2008 to great fanfare, many ventures fell foul of the unexpected financial crisis and subsequent global recession.


UK air taxi company Blink says raising brand awareness has been one of its biggest challenges
Pioneer Bikkair was one of the first air taxi casualties. Europe's much vaunted operator led the way in March 2008 against a backdrop of high consumer spending and economic growth. The Netherlands-based company planned to operate a fleet of up to 100 Cessna Citation Mustangs by 2012 from a network of bases situated no more than 30min flying time apart. However, after almost a year and with only two Mustangs in the fleet, the company folded. A paucity of customers and available funding was blamed for the collapse.

The finance drought is also blamed for delaying the launch of JetBird's equally ambitious air taxi offering. The Ireland-based company had a vision to operate up to 100 Embraer Phenom 100s throughout Europe and carry 275,000 passengers a year. However, unable to secure the necessary capital to fund aircraft purchases, JetBird was forced to cancel its firm order for over 50 of the VLJs. JetBird has declined several requests for interviews, but is believed to be negotiating a new contract with Embraer with a revised delivery schedule and is continuing to seek new funding opportunities.

The fervent plans of other start-ups such as Acceljet of Iceland, One Charter of the UK and Taxijet of Spain have also been thwarted, this time by the demise of Eclipse Aviation - manufacturer of the Eclipse 500 VLJ on which these air taxi programmes were to be based.

"We got our fingers burned by the Eclipse fall-out," says Conor Neill, chief executive of Taxijet - now a management company.

TAXIJET LOSS
Taxijet's business plan called for a fleet of up to 150 aircraft across bases in Europe and North Africa each managed on behalf of their individual Eclipse 500 owners. These Spanish owners lost a great deal of money when Eclipse went down, Neill says, "but we haven't given up our plans to return to the air taxi market".

He brushes aside any suggestion that the EA500 could be considered in Taxijet's plans, despite the VLJ programme being under new ownership with plans to resurrect its manufacture at a later date. "Returning to the Eclipse for my investors would be a painful pill for them to swallow," Neill says.

Instead Taxijet is evaluating other types for its new air taxi operation, which it plans to start in 2012, when the recovery is expected to be under way. Of particular interest is Spectrum Aeronautical's S-40 Freedom business jet under development. "We want a more technologically advanced aircraft this time," Neill says. Taxijet's next foray into the air taxi arena is driven by Spectrum's development timetable, and the rate of Spain's fragile economic recovery, he says.

Taxijet is owned by three private investors and a further two investment groups are set to join the company. "Next time we will do things differently," Neill says.

A fleet of 60 aircraft is planned. Each model will be divided between four owners [for tax purposes] and will be flown between 600h and 800h a year. "Scale matters. We will have around 12 bases with a minimum of four aircraft at each base and our focus will be on the Mediterranean markets."

Neill is confident that a market exists for low-cost air taxis and is determined to succeed with the new model. "We will have an aircraft that is unique to the air taxi market in Europe so we will not have the 'me too' stigma attached to late entrants."

No such label can be attached to Blink - Europe's second air taxi start-up that began operations two years ago with the first of 30 Mustangs on order.

"This has been a tough market to operate in," admits Blink's co-founder and chief executive Peter Leiman, "but we are starting to overcome the inertia of brand awareness, which has been one of biggest challenges - particularly during the economic crisis, because people are not travelling as much."

Although Blink raised $30 million before its launch, Leiman says the company has to be prudent with the money. The air taxi business is capital intensive - high costs and low revenues - he suggests, so it is vital to keep the margins and the risks as low as possible. "This is not a hobby. We raised a lot of money and our investor is focused on a return. You don't provide a return without growth," says Leiman.

As part of its low-cost strategy, Blink gives passengers the option of flying into small, under-used secondary airports - such as Blackbushe in the south of England - where the landing fees are a fraction of those at larger, more established airports such as Farnborough or London Luton. "People want value for money in a safe and reliable aircraft. They don't care about the sizzle, a fancy cup of coffee or a VIP terminal," says Leiman.

Blink has seven Mustangs in its fleet and because of the soft market will not take delivery of any more aircraft this year. "We own all the Mustangs and live and die by the volume we get on these aircraft," Leiman says. The annual utilisation for each Mustang is 500-600h, Leiman says. "We hope to take more aircraft next year when we expect the market to pick up."

To help expand Europe's air taxi market, Leiman believes like-minded operators could work together by leveraging each other's aircraft when demand dictates. "There are lots of great opportunities for air taxi companies who are not in the same region to work together. This will also help us to build scale and keep our costs down," Leiman says.

To help stimulate growth, Blink is developing an online pricing and booking system that will allow the company to by-pass brokers - which account for 30% of its bookings. "This platform is the holy grail and will allow us to grow our very important web business."

Fellow Mustang operator GlobeAir is using social media to attract new customers. "Of course we use the traditional selling methods of knocking on doors and using brokers, but social media sites such as Twitter and Facebook allow us to reach more people," says GlobeAir founder Bernhard Fragner.

The privately owned Austrian operator, which launched commercial services in September 2008, has five Mustangs in service and an order for 10 more. A further two aircraft are to be delivered by the end of the second quarter. Fagner says a portion of GlobeAir's business comes from existing travellers seeking to downgrade from larger jets as a result of economic constraints.

"As the market improves many of them will move back up, so we are looking to attract more completely new customers and generate new markets," says Fragner.

A key target market for GlobeAir is the first and second tier of management within "specialist" companies such as computing or finance. GlobeAir's customer base is now split evenly between business and leisure travellers, but Fragner is keen to boost its ratio of business customers to lessen the impact, he says from the volatile, seasonal leisure market.

"The key is good branding," Fragner says. "Eclipse's collapse tainted the VLJ image initially but things are beginning to change." GlobeAir is building up its fleet as quickly as it can to minimise costly empty legs and like Blink is averaging 600h a month on each of its Mustangs, focusing on Austria, France, Italy and Switzerland, Fragner says.

"I am a strong believer in an homogenous fleet," he adds. "To break even and build a sustainable business we need to reach a critical mass of eight aircraft [which GlobeAir plans to have before the end of the year]."

For newcomer Ambeo, the key to a successful air taxi operation is the speed with which it can build up the fleet to service its target region and minimise the empty legs.

"The challenge is how you scale up from small operator to large operator and provide the cost advantages for you and your customer. None of the air taxi companies has been able to do that yet and so prove that this concept can work," says Ambeo executive director Andy Black.

The Cambridge, UK-based company only began operations in January with one Mustang, but is gradually building its fleet of managed and owned aircraft. Two more Mustangs are scheduled for delivery this quarter and another two aircraft, including the first Phenom 100, by the end of the year. "We plan to grow the business conservatively with a view to having a fleet of up to 30 aircraft by 2014," says Black.

He argues that until critical mass can be reached, the branded air taxi companies will remain low-cost charter operators. By definition, the low cost air taxi model is based on having a large fleet of heavily used, cost-efficient aircraft, spread across a pre-defined region and which are rarely flying empty. "You can only transition to the air taxi model as you grow your fleet," Black says. "This is a capital intensive business so luckily the acquisition cost [of the VLJs] makes it easier."

He admits that it is early days for the air taxi concept. "While the indications regarding the performance of the VLJs is positive so far, these aircraft have not been in service long enough to prove that they can take the stresses and strains of high utilisation - north of 600h - that is expected of them," Black says.

This high level of demand is an area that confounds fellow UK charter operator London Executive Aviation, an operator of seven Mustangs - two managed and five owned. "Where is the demand for air taxi coming from? Some people may have traded down, but most people have simply stopped flying," says LEA co-founder and chief executive Patrick Margetson-Rushmore. "The only [business aircraft] category holding up in this economic environment is the super-midsize upwards."

In 2002, Margetson Rushmore says LEA was an advocate of the low-price-point air taxi model but realised that this could only be achieved by flying around 1,000h a year. "The level of demand is simply not there at the moment," he says, adding that LEA is averaging 250-300h a year on each of its Mustangs.

"The shorter the range the more hours you have to fly to [make the business profitable]. If you are only charging the customers by the hour [rather than for the return journey] you have to work that aircraft hard and hope you can fill the empty legs."


A number of customers using GlobeAir's Mustangs are downgrading from larger jets 

INVESTMENT ADVICE
Margetson-Rushmore advises air taxi companies to invest more heavily in marketing and infrastructure across key European countries to help build awareness of the air taxi concept. He says: "Get local people on the ground to help promote the air taxi vision."

To help boost passenger volumes air taxis Margetson-Rushmore says operators should consider introducing scheduled services to key European destinations with pre-determined departure and arrival times.

"There is a good possibility that some form of air taxi model will work, but the amount of time it will take to create this market cannot be underestimated," he says.

The prospect, however, does not daunt Paulo Sommariva, founder of what could be Europe's first per-seat on-demand air taxi service, AirCab.

"This model is the way forward," he argues. "Our target market is airline travellers who fly in business class and not people who fly on private jets. The business class user is a much bigger market," Sommariva says.

AirCab says it is not competing with Lufthansa Private Jet's first-class business jet service. "It isn't about exclusivity and high prices, but flexibility and value," Sommariva says. "Airline business class is on its way out in Europe as people don't want to pay ridiculous prices for a nice sandwich, a little extra leg room and the ability to change their flight," he adds.

German operator Air Cab will use a fleet of Mustangs and/or Phenom 100s, which have the ability to operate from hundreds of airports throughout Europe. "They will give the passengers greater flexibility by getting them as close as possible to their final destination," says the Munich-based company.

Sommariva plans to launch the operation within six years and expects the concept to be adopted by most major European carriers within 15 years. "We will prove the concept first and then within 10 years we expect the first of many large airlines to offer the service," he says.

MORE
Eclipse's demise and its impact on the European air taxi market