Your Air Taxi Is Almost Ready


Despite big-name, big-money competitors waiting in the wings, Bill Herp doesn't see his air-taxi company as an underdog. The founder and CEO of Boston-based Linear Air isn't too concerned about competition from industry veterans like former American Airlines (AMR) Chairman Bob Crandall and People Express' Donald Burr, or business pros like Citrix (CTXS) co-founder Ed Iacobucci. Though their own air-taxi outfits, Pogo and DayJet, come to the table backed with fame and fortune, they're not slated to take flight until a groundbreaking class of "very light jets" (VLJs) hit the runway sometime next year.

That, Herp says, makes the already up-and-flying Linear Air an unmistakable "overdog." "Clearly [Pogo and DayJet] are going to be in catch-up mode when they ultimately get into the market," he says. "We've got a comfortable lead in terms of building a customer base."

A NEW ERA. It's not that these outfits are slacking, it's simply that their business models hinge on the revolutionary VLJs, which promise all the advantages of a jet at the price of a turboprop. They're integral to Linear's long-term plans, too, but Herp decided to make his move with existing planes, to build a customer base in advance of the VLJ's debut.

Why is the industry abuzz? The four- to six-passenger aircraft will retail as low as $1.4 million, less than half the price of today's lowest-priced jets, and cost well under $1 per nautical mile to operate -- comparable, if not lower, in price to slightly larger-capacity turboprops that fly at only half the speed.

Weighing about as much as an SUV and powered by two jet engines tiny enough to slip into the trunk of a car, VLJs have the aviation industry giddy with possibilities. "Our fleet forecast projects that these manufacturers may not be able to build enough of these things fast enough," says Michael Boyd, president of Boyd Group, an Evergreen (Colo.) aviation consulting and forecasting firm. "If they're anywhere near as advertised in terms of performance, it's going to be a stampede to buy them."

FIRST-MOVER EDGE. The number of companies operating business aircraft in the U.S. nearly doubled over the past decade, and fractional jet ownership has grown 62% since 2000. Supporters claim that VLJs will give birth to a new era in which private jets will be the transportation of choice not only for executives but also for a host of business travelers further down the corporate ladder.

The premise behind the taxi concept is to use the new aircraft to offer on-demand, per-seat pricing on jaunts between traditionally hard-to-reach regional airports -- avoiding the lines, hassles, and hubs associated with the commercial airlines, while still providing a vastly less expensive travel option than today's air charter and full or fractional jet ownership.

But for now at least, most new air-taxi companies like Pogo and DayJet are in a holding pattern, waiting for the Federal Aviation Administration to give VLJ manufacturers the green light on mass production, expected in early 2006. Though these jets are also critical to Linear's game plan (it will purchase 30 Eclipse-500s between now and 2007), when Herp realized that most of his competitors weren't planning to offer service until after the arrival of the VLJs, he saw the perfect opportunity to claim a first-mover advantage.

HASSLE-FREE. His goal wasn't simply to get a head-start in building a customer base but also to begin prepping people for what he sees as a coming paradigm shift that will get travelers of all kinds out of their cars and off of commercial airlines. "Most people who will be able to afford these new jet taxis don't think of private air travel as an option right now," he says. "The knee-jerk reaction is that it's just too expensive."

Beginning with a $2.7 million investment and using the Cessna Grand Caravan (a single-engine turboprop that goes half the speed but has similar acquisition and per-trip operating costs as the Eclipse-500) as a proxy for the new jets, last August Linear Air began offering per-seat private air travel from the Boston area's Hanscom Field to Martha's Vineyard and Nantucket for just $189 one way, roughly the same price as a commercial airline ticket.

When the new jets debut, Herp reasons, these clients will already be accustomed to this hassle-free mode of travel and will easily switch to VLJs. While rising fuel costs have pinched everyone in the aviation industry, the advantage of VLJs remains the same -- they're the cheapest alternative.

"THEY'RE HOOKED." Herp's strategy already may be working. In the first quarter of this year, 60% of Linear's business was with repeat customers, and seats on the most popular times and routes now tend to fill up. "People get on the airplane, they look around, their mouths drop open, and they say 'I can't believe I didn't know this existed,'" says Herp, who is himself an instrument-rated commercial pilot and sometimes flies for Linear. "And then they're hooked."

But not everyone is a believer. While looking forward to VLJs and their anticipated impact on making overall jet ownership more affordable, some aviation analysts are skeptical of the air-taxi concept.

"People say it will be like FedEx for people," Boyd says. "We don't think that's really going to work." Because demand levels are uneven, and the air-traffic control system is already at overcapacity, he says it will be very difficult to make the per-seat pricing model work at a reasonable price.

OFF THE BEATEN PATH. But for Jerry Hefner, project manager of the NASA-led Small Aircraft Transportation Systems program, it's the same sort of skepticism that greeted the advent of transformative technologies like trains, copy machines, and home computers.

The five-year, $150 million SATS research project -- a public-private partnership between NASA, the FAA, and the National Consortium for Aviation Mobility -- recently culminated in a demonstration of newly developed technologies for small aircraft to enhance their ability to use the nation's 5,300 regional, public-use landing facilities -- many of which are unmanned and without radar.

Since most Americans live within 30 minutes of a regional airport, the goal is for the new SATS technology, in combination with VLJs and the emerging air-taxi industry, to allow more access to more communities in less time.

MORE POSSIBILITIES. That'll ease the pressure from already crowded interstates and aviation hubs and make possible a host of trips that people don't even think of taking right now because of the accompanying inconvenience, Hefner says. "We're enhancing the mobility of the American people," he says. "It's an exciting future."

In just under a year, Herp and his partner, Michael Goulian -- who operates Bedford (Mass.)-based Executive Flyers Aviation, the largest flight-training facility in the Northeast -- have already expanded their fleet from one to three Cessna Grand Caravans now flying in the Boston and New York markets. Linear currently has 24 employees.

The goal is to be in five markets by early next year and have a 300-aircraft fleet by 2010. Herp, a former tech entrepreneur, is now in the process of raising a second round of capital to support the $10 million in financing needed to purchase the first of 30 VLJs. For now, his focus is on expanding the market, and he doesn't expect to be profitable until sometime late in the decade.

ROOM FOR EVERYONE. Though Herp admits that companies like Pogo and DayJet will be able to play catch-up pretty quickly, he says there's plenty of room for everyone. U.S. Transportation Dept. statistics show as many as 16,000 passenger enplanements per day out of regional airports within a 500-mile radius of many major metropolitan areas. Linear figures it would need to capture only a fraction of that to make a given market profitable.

Hefner, who's retiring this summer after nearly 40 years at NASA, sees this as the century of personal air transportation. His only problem with the new air-taxi companies is that they have yet to go public.

"If they were, I'd be putting my money into them," he says. "They're at the leading edge of what I think is going to be a significant change in our country." Taxi, anyone?

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