Air Taxi—Myth or New Market Niche?
Reprinted with permission from Karen DiPiazza and Airport Journals
By Karen Di Piazza
NOVEMBER 2004
With all the hoopla from manufactures producing very light jets, each professing their aircraft to be the right one for the air-taxi market, we wanted to know if there is, in fact, such a market waiting to be served. We interviewed numerous companies and individuals seeking answers. The Teal Group is a highly respected research firm providing services to the aviation industry. Other participants for this article were interviewed for their diverse opinions and perspectives.
Air taxi—what’s that?
Richard Aboulafia, vice president of the Teal Group, a Fairfax, Va.-based research company that provides industry with up-to-date analysis, and has often provided data on the puzzling questions of whether or not thousands of VLJs will be flying around anytime soon, is an air-taxi atheist.
“I think it’s reasonable to say the skies won’t be blackened anytime soon!” he laughed. Aboulafia manages consulting projects and advises numerous aerospace companies.
“I suppose I should modify my status of air-taxi atheist to air-taxi agnostic—it’s somewhere in between how I feel about the viability of VLJs being produced in the thousands for an air-taxi population,” he says. “If the term air taxi means ‘the already existing popular form of on-demand charter,’ where Part 135 operators just manage people’s aircraft and book people on them when they’re available, I can believe in that; that’s already the case. However, I’m a 100 percent atheist about a mass air-taxi system—despite James Fallows’ wonderfully written book on the subject.”
Richard Aboulafia, vice president of the Teal Group, said he’s an air-taxi atheist.
He said when VLJs are produced, he doesn’t believe it will change a thing from what we’re already doing today. One of Aboulafia’s reasons for his air-taxi atheism comes from how the whole air-travel market operates.
“A lot of people mistakenly believe the air-travel market is like a pyramid, from the top, where, you have business jets, the least amount of people flying in masses, down to the base where you’ve got millions of people flying in the back of Boeing 757s—like me,” he said. “Air-taxi proponents figure if they move down a notch from the business jets at the top, they’re going to find a whole bunch of people. With less money, but still more people. In other words, they think by extending the tip of the pyramid downward, they’ll have a built-in air-taxi population that can support the theory that thousands of people will fly VLJs and create a ‘new’ air-taxi segment. It doesn’t work like that. It’s wishful thinking; it’s not reality.”
He said economists today describe society as an “hourglass,” not a pyramid, thus, it’s an explanation to why there isn’t a market for a mass air-taxi population that will travel on VLJs.
“The hourglass has a tiny little corner at the top, and then it’s pinched off, not leaving much between there and the rest of the pyramid of society,” he explained. “What I’m saying is, with the hourglass, when you go down looking for a broader market, you don’t find anything. People either have money and the ability to spend it, in which case they’re in fractional jets, or they’re somewhat cost restrained and fly on commercial airliners. I don’t believe in the air-taxi myth; people aren’t quite ready for ‘real’ biz jets, but they have too much money for first class, and too many stringent requirements for first class, so they’ll fly in a mass air-taxi market. It’s a mythical land that doesn’t exist.”
Aboulafia backs his beliefs up by the fact that by the second half of the nineties, the business jet market grew by 350 percent.
“The reason that happened was that the high end of the economy grew at a disproportionately fast pace; corporate profits did great,” he explained. “The extreme top end of the population enjoyed similarly explosive income growth, and the availability of fractional ownership made it easier for them to move from scheduled to private air service. While economic growth also helped other segments of the population, the boom was weighted towards the top. So, the gap between the rich and everybody else grew, corresponding to what economists call the ‘hourglass model of the economy.’”
He said the top one percent did great, but the middle and upper middle classes stayed just as cost-sensitive as ever.
“Unless you were top management, your travel budget remained as constricted as ever,” he said. “I should know; this upper middle segment of society is basically me and most of the people I deal with. Trust me; my socioeconomic peer group isn’t moving away from scheduled air service to private aviation—even a modest-sounding air-taxi service—anytime soon.”
He said if there were truly an untapped air-taxi population, Citation 500s or existing turboprop aircraft, such as King Airs, would fly for that purpose.
“There isn’t any good reason why, if an air-taxi population existed, you couldn’t use those aircraft,” he said. “A King Air would have longer range, although it would be slightly inferior in speed. However, it certainly would be a lot more comfortable for passengers; you wouldn’t feel like you were cramped into the back of your dad’s Pontiac. If there were any evidence of an air-taxi population, you could use a King Air B200 or 350. Why not?”
Aboulafia believes OEMs and other proponents of the air-taxi concept have created an illusion that the concept could only work with VLJs. He said proponents of this myth are under the impression that the cost per mile, per person to fly, would be less expensive with a VLJ.
“You can take that reasoning and apply it to a larger turboprop,” he said. “You can fit more people and all the passengers’ baggage, too, if you can fill all the seats on a regular basis. If an air-taxi population were to exist, the cost wouldn’t be that much higher. Cost alone shouldn’t be the boilerplate, on what is said to be such a huge market.”
As glib as Aboulafia’s air-taxi predictions are, he surprisingly accepts possible virtues of it, where Pogo is concerned, which plans to use the A700 to launch its operation in the northeastern part of the U.S.—within a 500-mile region to start.
“I actually think Pogo is as close as you’re going to get to a good business case,” he said. “That’s partly because of geography; not only is the northeast and mid-Atlantic a very dense and rich area, but there are a fair number of substitute airfields. There is an advantage for Pogo in that area because there have been service cutbacks, and the likelihood of more if something happens to US Airways.”
Aboulafia added though, finding financing to back any of these schemes is tricky.
“At the end of the day, investors have to look at the fact it’s not an established manufacturer or an existing airline, so it’s risky,” he says. “It’s a totally new venture, new concept and new planes, which have un-established residual values. If you invest in it, it’s not like you’ll get 70 percent of your money back if it folds.”
As well, he’s suspicious about Eclipse Aviation’s order book claiming 2,111 firm orders.
“When it comes to verifying orders, Eclipse isn’t ‘transparent,’” he said. “In my book, no one has any orders until they prove it. There’s a big difference in the aerospace industry between jetliner orders, which are totally transparent, and corporate general aviation orders, which are totally opaque. But as far as the Eclipse 500 goes, I think it’s the most technology advanced, so it’s the most promising; but for my money in this industry, viability is based upon realistic expectations, so it’s refreshing to hear Adam Aircraft Industries talk about producing aircraft in realistic numbers.”
Joe Walker, president of Adam Aircraft, said that Pogo had ordered 75 A700s specifically for air-taxi purposes, while owner-pilots had ordered another 30.
“Again, Pogo may be on to something, expanding small, regional air-taxi service,” Aboulafia said. “Whereas, the Eclipse plan depends on mass production, which is unlikely to happen.”
As recently as Oct. 11, during the NBAA Convention held in Las Vegas, Eclipse Aviation CEO Vern Raburn said Eclipse would deliver the first production jet in March 2006, and another 260 aircraft in the first 12 months of production, and then 880 more aircraft over the second 12 months and up to four aircraft per day thereafter.
“Without this revolutionary air-taxi service, like the defunct one using Eclipses proposed by the Nimbus Group a couple of years ago, Eclipse depends on owner-operators,” Aboulafia said. “However, few owner-pilots can find the cash for a jet. The $1 million to $2 million segment is historically a no-man’s land. Either people need a real business jet, which is more expensive, or they are hobbyists—owning part shares in something like Skyhawks. The stuff in the middle is quite modest; every year sees deliveries of a few hundred PC-12s, TBM 700s, Caravans and whatever else. Many go to cargo and airline markets.
“And I have a scary aviation industry fact: since 1960, only one all-new company, Embraer, has been created and succeeded in delivering more than one jet per month. And looking at typical aircraft production rates for business aircraft, it’s historically 40 to 100 per year.”
He added that in order for Raburn to support the forecast of producing such high numbers of aircraft per year, to support his business case, or for anyone else to support such claims (no one except Raburn has claimed such high numbers), “they’d have to open the order books!”
“I’ve seen several failed business plans and failed order books over the years,” he said. “In terms of ‘words,’ Eclipse or anyone else can say whatever they want, but until it’s proven, they’re just words. As for Eclipse’s orders, I’m sure some of them are real, but others may be expressions of interest or signatures that aren’t backed with anything. We have no way of knowing though.”
Further, he said Eclipse would have to find an air-taxi partner, such as Nimbus, to support such high production rates.
“That would be a difficult prospect, considering that any such service would need to start with hundreds of planes and scores of bases to avoid flying money-losing deadhead flights,” he said.
Raburn said the Eclipse 500 was designed from the “outset to meet the high-reliability demands of air-taxi operations that may exceed 2,000 flight hours per year,” and addressing those requirements, Eclipse applied state-of-the-art Maintenance Steering Group (MSG-3) maintenance principles.
Vern Raburn, CEO of Eclipse Aviation, believes VLJs will transform the way people travel.
“The goal of Eclipse is to bring the word ‘personal’ into aviation, making it possible for commercial air passengers to move directly between cities on a quick, affordable and convenient basis, which also allows pilot-owners to enter the world of jet-powered aviation,” Raburn said.
However, he declined answering if Eclipse had a Nimbus-like customer to support his opinions and declined to verify its order book.
“When the critics choose to actually take time to learn something about the Eclipse 500 and our program, then I will be happy to engage in a discussion,” he said. “Until then, I have little regard for people who position themselves as experts on subjects without investing the effort required to actually develop expertise. In fact, virtually none of these so called experts has ever requested a full explanation from Eclipse.”
Aboulafia said that wasn’t true.
“I’ve talked to Vern several times about Eclipse; I’ve even had breakfast with him,” he said.
Raburn acknowledges uncertainty in the air-taxi market.
“It’s true that our story on reliability for an air-taxi operation hasn’t yet been told, but these people aren’t fazed,” Raburn said.
Been there, done that
Matthew Andersson, chair and CEO for Arizona-based Aviation Development Holdings, Inc., and member on the Federal Aviation Administration’s Part 135/125 Aviation Rulemaking Committee, believes the VLJ has no viable application in a commercial, point-to-point air-taxi system.
Matthew Andersson, chair and CEO for Arizona-based Aviation Development Holdings, Inc., believes there is no ubiquitous air-taxi system.
As the founder of Indigo, a corporate jet airline provider backed by the McKinsey Company and American Express, and as the author of a white paper on this subject, published by Institutional Investor, Andersson said that findings led him to believe VLJs are the wrong planes for a ubiquitous air-taxi system.
Indigo, the Chicago-based operator, which started operations in February 2000, but suspended flights last year in May, provided service between Chicago O’Hare International Airport and Teterboro Airport, with a fleet of Falcon 20s, shuttling executives from point-to-point. At one point, it had plans for a 150-airplane fleet, servicing more than 60 cities in the U.S.
“I refer to the air-taxi market as PAC—private airline carriers,” Andersson said. “Versus the airline market, it isn’t commercially figured; it’s severely handicapped by many constraints that are not being addressed. First, there isn’t an air-taxi ‘industry’ by definition—no third-party financial intermediation, i.e. banking, because there’s no return on investment. There’s no ROI because there’s no return on assets, and there’s no ROA because air taxi is not a commercially viable business model that exploits the aircraft properly.”
He said air taxi already exists today; it’s called Part 135 charter, which doesn’t own aircraft, so there’s no asset.
“Pricing is where the rubber meets the road; it’s the key constraint holding back the industry in its current state of low relative demand for private so-called air taxis,” he said. “VLJs are nothing more than GA aircraft; it’s a fact, not an opinion. VLJs are designed for low-utilization private use. It may be quite a successful product—an economical replacement to the pilot that flies a piston twin or turboprop, and it may be successful in the private pilot segment, even some civil training segments, but beyond that, it has no application.”
He said VLJs are a new product in the mix of current products offered by traditional manufacturers.
“The VLJs are not designed, nor engineered nor can they be supported in an aftermarket, after sales, high utilization commercial operation,” he said.
Andersson said all of the VLJs fail when it comes to seating capacity, cost, high-utilization maintenance and engineering. He said once you have a two-pilot crew, which is required, four passengers, all the luggage and a little jet full of fuel, the VLJ won’t be taking off for anywhere—very far.
“They will not provide a viable lift platform for a commercial operation, a for-profit operation, which you’d have to have to make money,” he said. “The VLJs aren’t designed for that mission. Just as the military has design specs for its aircraft, so does the civil sector and the VLJ is not that aircraft. Even hosting a discussion involving the VLJ as a commercial platform is entirely incoherent; it’s simply not designed for commercial operation.
“With the exception of Honda, not one VLJ manufacturer could financially launch a large-scale air-taxi operation,” he said. “It’s more than the plane itself; there’s more to providing a potential viable large-scale operation. Any OEM manufacturing a VLJ has to weigh how they would support it technically, operating it, maintaining it and if they have to, finance it.
“Large companies such as Raytheon, Bombardier and even Textron couldn’t do this because they are busy trying to manage the financial challenges faced by respective product lines in a changing marketplace as it is. Further, because of inherent diseconomies, no one will economically finance VLJs; residual value is unknown and because operator creditworthiness is weak, cost of any capital is untenable. OEMs know this, yet they continue marketing the product based on erroneous, high-production levels.”
Andersson noted that premium used small jets could be purchased for air taxi use, but with twice the seating, and turboprop aircraft that can carry eight passengers for $2 a mile could be chartered for air taxi. He points out that’s already in existence.
“So where are all the air taxis?” he says.
What’s the bottom line price?
Will traditional frequent business travelers choose to fly in a VLJ over current substitutes that exist in the industry, which includes the airlines? Not according to Andersson and other critics—not on a basis where it’s a revenue-losing proposition.
“Pricing would have to be radically lowered in order for that to ever happen,” Andersson accessed. “With that in mind, the upper limit price per mile to the consumer couldn’t exceed 50 cents per mile in order to create a large enough network of passengers to support the logic of the ubiquitous air-taxi service. You’d have to have millions of passengers aggregated around a number of city pairs in order to fill the requirements of a commercially profitable air taxi. You have to be able to fly from point A to B, and B back to A with someone onboard paying you.”
He said with very high revenue hours, its not 100 percent revenue hours compared to total flying hours, and that can’t happen in an industry that’s charging anywhere from $1 to $6 a mile.
“Consumers won’t pay that amount; there’s not sufficient numbers of people to create a dense enough network to support the air-taxi concept,” he said. “The ubiquitous air-taxi concept, which is separate from the air-taxi industry, if you want to call it that, exists today.” He uses Eclipse as an example of what he believes is a falsehood of promises.
“Vern Raburn is advancing an argument that Eclipse’s aircraft will be absorbed into either a current air-taxi population or by helping to create a new one that may be represented by a company such as Pogo. He believes he can create a new industry, but it’s factually erroneous,” he charged. “That’s because the advocates of the relative mass market air taxi haven’t thought through the market requirements; they haven’t designed an airplane that supports those needs. Inclusive of the reasons already stated, most importantly it would require an airframe and an engine that was designed for high-utilization, which is not the VLJ.
“For example, Eclipse, Adam and other VLJs have time between overhauls on the engines that are entirely consistent with the current lineup of GA planes, which also aren’t designed for air-taxi operation—meaning the engines on VLJs have to be overhauled every 3,500 hours. Whereas engines on commercial regional jets, for example, built for flying 2,000 to 3,000 hours a year, have TBOs of 10,000 hours or greater. If you take a VLJ and put it into commercial service, fly it 150 to 200 hours a month, which it must to make money, you’ll go through engine overhauls, compressing the maintenance cycles so severely that the airplane will be going through maintenance cycles at rates that just aren’t feasible.”
Andersson asserted that no one knows how VLJs are going to hold up structurally to this kind of use. Critics charge that the lower the airlines charge for a flight, the less likely the flying public will use a substitute, even a private jet experience. He said this is precisely what people don’t realize when comparing the two.
“I’m referring to the relative mass market, not the retired CEO that flies three times a year between Phoenix and LA and is willing to pay $3 a mile; you can’t find enough of those people to build a business,” he said. “That’s also not what Pogo is referring to; they are talking about the concept of ubiquitous service, as am I, as would be anyone. But let’s take Pogo’s figures of between $1 and $6 a mile and spilt the difference at $3 on a 300-mile trip, a typical flight that anyone could relate to. It would cost $900 for a one-way trip; that’s $1,800 for a round-trip. I can fly on Southwest, the same trip, for $90. You can go up or down from there, but 50 cents is the max, or it won’t work; that’s why we don’t have a ubiquitous air taxi today.”
Andersson brings up another point, “yield-managed” seats, meaning if four seats are filled, the price per person, per mile goes down, which he say’s is ridiculous.
“Pogo’s idea is to ‘yield manage’ those four little seats, which of course, only adds cost, alienates consumers, reduces the target market and, moreover, masks the current inefficiencies of the airplane and the air-taxi business model,” he said. “While the VLJ may have very low direct operating and departure costs, its total life-cycle cost will be distorted and high; its cost per seat mile will be among the highest in the industry. Pogo may have raised about $6 million, but it needs at least 20 times that amount to enter the market and stay long enough to acquire any meaningful amount of customers.”
He said everyone forgets about the four A’s principle: airport, airspace, airline operator and airplane.
“We’ve covered most of the A’s, but another important one is all the reliever airports that Raburn and others claim will be accessible because of the VLJ, which is false,” he said. “While it’s true that the airlines only cover about 700 out of about 5,000 airports, 50 percent of those airports are not configured for mass-market consumer service. What I mean is they aren’t Part 139 certified, which means no crash, fire and rescue services; they’re years away and tens of millions of dollars away from being qualified for Part 139 certification. Next, they aren’t secure, and there’s no passenger processing facilities; there’s insufficient parking, no terminals, and no rental cars, taxis, trains, busses, inter-modal or multi-modal facilities, etc.”
He also addressed dirt landing strips.
“Raburn talks about how the VLJ can land on dirt strips, but so what!” he said. “Any number of turboprops can; so can a Cessna Citation. In fact, a Citation can do it better, so there’s nothing differentiating about the fact that the Eclipse can fly into remote areas. A twin Otter can do the same thing, as can older designs for that matter. Yes it’s a statement of fact about the airplane, but it doesn’t differentiate it from other aircraft in the GA lineup, nor does it have any bearing on its functionality as a platform to be in the commercial air-taxi system.”
Pogo—an in-your-face idea
Heaven knows, if we could avoid the two-hour departure wait, the wand probe at security, mile-away parking from the terminal and discourteous airport personnel, we’d all love that. Cameron Burr, founder and executive vice president of Pogo Jet, Inc., which plans to launch an air-taxi business in 2005—just as soon as Adam Aircraft can produce its A700, a six-seat, twin-engine jet—says airports can be avoided, at least in the northeast of the U.S., to start.
Cameron Burr, executive vice president of Pogo Jet, Inc., said the company was starting an in-your-face air taxi service.
Burr isn’t alone in his venture or optimism. His father, Donald C. Burr, who founded People Express Airlines in the eighties, is Pogo’s CEO, but the chair of Pogo was enemy number one, American Airlines chief Robert L. Crandall, who put PE out of business.
“I’ve listened to naysayers criticize our idea for three years; that’s how long it took us to finalize our concept,” Cameron Burr said.
Burr worked on Wall Street for years, and then spent 10 years working at The Burr Group, a financial banking firm and private equity firm, which invested in and advised aerospace companies.
“I’ve heard it all; they simply don’t understand what we’re about,” he said.
They decided on a name for their company after learning that “Pogo” was a possum in a comic strip created by Walt Kelly, which ran in papers from 1948 to 1973.
“Pogo ran around saying, ‘I’ve seen the enemy and the enemy is us,’” said Burr, referring to McCarthyism. “Kelly was so ahead of his time, portraying Pogo as an antiestablishment, in-your-face, we’re-going-to-do-things-differently possum. That possum and us have a lot in common, which Aboulafia, Andersson and the rest of the critics fail to see. We’re doing a nontraditional and an in-your-face air-taxi business.”
Burr isn’t the only one excited to see his Connecticut-based air-taxi business take off. The National Aeronautics and Space Administration has been an advocate of the air-taxi concept; they’ve been working on a project known as the Small Aircraft Transportation System for years. Its purpose is to find ways of eliminating airport and highway congestion, but with much of the focus on redirecting travel patterns in small communities.
NASA’s associate director at Langley Research Center, Dr. Bruce Holmes, who will deliver a report, the “Next Generation Transportation System,” at the White House next month, exposed ideas of what transportation scenarios might look like by 2025. The report is expected to praise the air-taxi concept; however, what the cost per mile per person should be, and whether the price is viable or a good investment, is not included, nor is an endorsement to use a particular VLJ.
Burr said during the beginning phase of Pogo’s operations, for the first couple of years regarding utilization, they forecast three to four hours a day, for what he refers to as a “progressive airline maintenance program.”
“Stack that up against what JetBlue is getting right now on utilization on an A320—they’re up to 13 and 14 hours a day,” he said. “There’s no reason that any of these VLJs can’t operate up to four hours a day; mechanically they can do that.”
Admittedly, he agrees there are challenges to face, but he said Pogo is doing everything in steps. They don’t plan to start offering air-taxi flights using the 75 aircraft they ordered from Adam all at once; they couldn’t be produced all at once.
“We forecast using 22 or 23 aircraft within a 13-month period, and based on our model, we’ll be cash flow positive then,” he said “I remember when everyone said no one would fly out of Newark on People Express, too. There was a popular fractional operator within one of the regions we plan to offer service in, which in 2002 had 41,000 trips with an average load factor across all its fleets of 30 percent. People paid an average of $21 per mile, so that ought to tell the critics a thing or two. Last year in the northeast, which is where we’ll start service, there were 19 million trips taken that were under 500 nautical miles, of which, two million of those trips were last minute, full-fare coach tickets.”
As for enough money to start such an air taxi, Burr said they’ve raised $8 million and acknowledged funding round-ups were far from over. He also said that critic Andersson was right about one thing: Pogo would not serve the mass market.
“We have never intended to replace the airlines; this is the Model T of a transformational ship,” he said. “He is wrong in saying that we’ll fail if the price isn’t 50 cents per mile per person; people are paying much more than $6 a mile, which would be our highest seat cost. We’re not metaphorically trying to be the yellow cab; we’re after a small percentage of the population, but that’s all we need to be very profitable. As our model of regional air-taxi operations succeed, it will open the doors to other companies wanting to do the same thing.”
He said by opening the otherwise closed doors that now exist in critics’ minds, when that happens, institutional investors will come forward knocking them down with investment money.
“We only need two passengers per plane to make the model work; it’s not going to be a problem,” he said.
When asked whether flying at FL410 was important to the air-taxi concept, he said no.
“I know, all the OEMs hype that up, but for an air taxi, it’s based on quick, efficient trips in an hour or so,” he said. “We won’t be climbing up there; it would take too long going up and coming back down.”
Birds of a feather in “Free Flight”
James Fallows is a Rhode scholar, pilot, the former chief speechwriter for President Jimmy Carter and author of seven books. The former editor of US News and World Report, and current national correspondent for The Atlantic Monthly, where he’s worked for over 20 years, awoke an understated giant—aviation—in his 2001 book, “Free Flight: Inventing the Future of Travel.”
James Fallows, author of “Free Flight: Inventing the Future of Travel,” believes VLJs have opened the door for an air taxi market.
People say his book has opened millions of people’s minds for possibilities yet to come—the air taxi. In his book, he focused on three groups at the time, which he credited for inventing a better, smarter, more efficient and comfortable way to travel: NASA, Cirrus Design and Eclipse Aviation.
“I wrote the book because I’ve been in aviation a long time, but the advancements that had been made weren’t mentioned much in the general press,” he said. “Since it seemed like the first wave of new innovation in GA had arrived, and it coincided with the pre-9/11 of overcrowding, congestion and delays within a taxed airline industry, it needed to be addressed. But today, countering the critics that an air-taxi system cannot work, I say it already is beginning to happen.”
He said in the aftermath of 9/11, the previous set of problems for the airlines continued to exist, but they had additional problems—delays driven by security procedures and the lack of service.
“So the one part of the aircraft and airline business since then has actually improved within the last three years, the private jet business, but it’s still very expensive; that’s the significance of the new aircraft manufacturers such as Eclipse, Adam or some of the foreign competitors,” he said.
He said that new aircraft such as the VLJs are bringing the cost down to operate aircraft.
“It’s not going to replace the airlines; it’s a substitute,” he says.
If the air-taxi concept goes wild, it could bring more cumbersome security with it, but, he says, VLJs can’t do the kind of damage we saw on 9/11. He also said that the U.S. could learn something about security from the Israelis.
“There are types of informal checks you can conduct,” he said. “The Israelis, for example, don’t have better metal detectors, but they have better human intelligence. For small charter operations, you have more human contact with someone getting on the plane; you have a better chance of knowing who that person is.”
He believes passengers will pay up $6 per mile; it’s being done now in fractional.
“I think the majority of VLJs will be operated by air-taxi companies, and piloted by commercially trained pilots instead of the owner-flown segment,” he said. “I think that’s what the manufacturers believe; I know that’s what Vern Raburn is saying. Few private pilots can afford a million-dollar jet.”
VLJs from a global viewpoint
Donald Spruston believes engine makers’ R&D divisions haven’t given 100 percent to the small engine capabilities that Adam and the other OEMs have now. When they tried, some of the productions were delayed; they were trying to find the right engine. Such was the case early on with Williams International’s EJ22. Although they went on to develop the FJ333-4, Eclipse eventually decided not to use Williams’ engine, saying it lacked thrust.
Donald Spruston, director general of the International Business Aviation Council, is a moderate air-taxi opponent.
Spruston is the director general of the International Business Aviation Council, headquartered in Canada. The nonprofit, non-governmental association represents, promotes and protects the interests of business aviation in international policy and regulatory venues, inclusive of the NBAA, in the U.S. He believes VLJs won’t shake up the industry any time soon.
“I think there’s been a tremendous amount of innovation in aviation, but maybe not in the VLJ area,” he said. “Institutional investment companies are keeping the VLJ at arms length; they don’t know what to make of the innovations made by start-up companies that are looking to get into the market or what to make of the OEMs trying to convince the market they’ve found ‘the new niche.’”
Earlier in Spruston’s career, he was a military pilot, and later, he flew as a commercial pilot; he still sees the doc and keeps his ATP certificate current. Although he says he hasn’t flown in three years, he’s ready just in case he can’t resist the opportunity.
“So, I know how passionate people can get when discussing aviation—especially the sensitive issue of viability and utilization over the VLJs,” he said. “VLJs will bring more people into the market. Companies will buy them who don’t have aircraft today. On-demand charter companies will start up because of them. Some companies will buy them because they’re less expensive—they didn’t own aircraft before, which the small size and small budget will fit the needs of just a couple people flying on company business.
“But on the whole demographics of the system, we don’t see it changing dramatically. Right now, the air-taxi industry is really the on-demand charter—planes that are subject to availability and incongruous pricing.”
He said that although Pogo is launching an air-taxi operation, owning its own aircraft, opposed to managing individuals’ aircraft, he still doesn’t see it changing from what we’re doing today—one infinitesimal piece of an ominous puzzle with the rest of the pieces working out of tandem. He sees the VLJ overall utilized by owner/operators, some on-demand charter and sprinkled with a few corporate Part 91 departments.
“However, the guy who came up with Federal Express was told his idea was a stupid one, so you can never say never,” he laughed. “People said that fractional ownership shouldn’t work, but Warren Buffett won’t get involved unless there’s a return, so there’s a whole bunch of these things that people said, ‘Ah, it can’t work!’”
Almost there—the A700
Adam Aircraft’s Joe Walker is understandably excited that the A700 will soon be the first certified VLJ in the world, but he realizes critics question the company’s backlog orders—the amount of money standing in the wings.
“Currently, our AdamJet backlog is at $300 million, most of which is Pogo,” he said. “We have another large fleet order for the A700, which we may or may not be announcing; we’re not sure yet.”
Walker, of course, says he favors the air-taxi concept.
“We’ve kind of put our money where our mouth is,” he said.
When pushed for answers regarding a potential new order, he said it was an order in the wings by an on-demand charter operator. He also said they have 65 no-turning-back orders for the A500, a twin-engine piston.
“We’ve always said we needed to certify the A500 first; it will pave the way to the A700’s certification,” he said.
Now that he’s president of Adam, he said the company realizes their real future is with the jet.
REPRINTED WITH THE PERMISSION OF KAREN DI PIAZZA and Centennial Aviation & Business Journal
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