There is a demand for about six million passenger trips per year in a mature air taxi system, according to an independent analysis by the Velocity Group. The demand calls for about 2,500 very light jets (VLJs) over the next decade, said the group, which added that while demand may be high, not all areas will be served. Differenc¬es in city sizes, location and existing air service patterns lead to the conclu¬sion that air taxis will be concentrated in the Southeast and Northeast-North Central states, and possibly Texas and California. Other locations are far less likely to economically support on-demand service using very light jets. The new transportation method has stirred considerable interest after the move by Express Jet (XJT) to develop corporate shuttles and the interest expressed by SkyWest (SKYW). In¬deed, such services could create a new air transportation paradigm which Regional Aviation News analyzed in depth in the November 13 issue. Ve¬locity’s report resulted from a critical review of the NASA Small Aircraft Transportation System (SATS)-fund¬ed analyses of this market, interviews with air taxi developers, as well as Ve¬locity’s own analysis of demand. From this base, the project team developed its assessment of air taxi prospects and identified expected impacts on the manufacturers, airports, airlines, FBOs and financing sources.
Too Many Aircraft Makers
While Velocity expects a healthy market for proposed aircraft, it indicated successful aircraft will be reduced to two or three, following the development of the aircraft offerings in the immediate post-deregulation period for regional airlines. Indeed, it is the need to fill the abandoned markets that is driving the development of the air taxi market segment, just as that need was filled by regionals in the 1980s.
“We anticipate a good market for Very Light Jet sales from both air yaxi and individual and corporate users,” said Velocity Group Partner Gerald Bernstein. “We anticipate the market demand by all users will be in the 600-700 aircraft per year range. Yet even this market demand will not support the collective production expectations of all six announced aircraft manufac¬turers, which exceeds 1,000 aircraft per year.
“But jumping into a ‘hole in the market’ is hardly new in this industry,” Bernstein continued. “Consider the regional turboprop market in the early-1980s, which boomed following U.S. airline deregulation, spurred by a new generation of turboprop engines."
Six manufacturers entered this market with aircraft seating from 30 to 50 passengers. Demand was strong and peaked at 300 units per year. But twenty years later, only two remain in production—deHavilland (now part of Bombardier) and the French ATR consortium. One of the entrants (Fokker) went into bankruptcy, another (Saab) wrote off its losses, and another (Shorts Brothers) was acquired after suffering losses from its program.”
Not All U.S. Regions Will Be Served
Velocity’s assessment of U.S. air taxi opportunities included an inde¬pendent analysis of demographics and current services levels. “We developed a ‘you-can’t-get-there-from-here’ index,” Bernstein commented. “We evaluated the connectivity between all commercial airports 300 to 600 miles from one-another. The greatest number without direct or non-stop service was in the southeast – particularly Georgia and contiguous states. The next densest cluster was a band of states from New York, through Pennsylvania, Ohio, Indiana and Michigan. West of the Mississippi, except for Texas, few states have sufficient population centers within close proximity to one-another for economic VLJ-type service.” The 300-600 mile range exceeds the distance business travelers are willing to drive, is less than a two-hour VLJ flight and it is the range targeted by current developers.
“About 40 million domestic passenger trips a year cost $0.25 to $0.35 per passenger mile for full-fare coach, business class or first class service,” Bernstein observed. “Approximately 13 million trips are made annually on corporate jets and turboprops with costs ranging from $2 per passenger mile to over $30 per passenger mile, depending on aircraft type and passenger loads. Air taxis will provide a new option for $1 to $3 per passenger mile.”