When Linear Air launches its first Eclipse 500 jet, it will mark the first customer trip for a VLJ in the Northeast. President and CEO Bill Herp told AviationToday’s VLJ Report that the company is awaiting approval of its general operating manuals and minimum equipment lists from its local FAA FSDO. Once the Eclipse earns its stripes in the Northeast, Linear Air plans expansion in California – Los Angeles and San Francisco – next year, in addition to a seasonal base in the Caribbean.
He said the conformity checks have been completed which included a change to the altimeter. “That showed the customer support from Eclipse and I was really impressed with that,” said Herp. “All that’s left is the proving runs and we hope to have our first Eclipse revenue flight by the end of the month.”
Linear promises air taxi service with prices not far above commercial airlines’ first-class or last-minute fares but with a slightly different model than DayJet, its Florida counterpart, which launched Eclipse 500 service earlier this month. While DayJet is a completely new operation, Linear is already in operation with the largest fleet of eight-passenger Cessna Grand Caravans in the U.S. for its on-demand service in the Boston-New York-Washington corridor and seasonal scheduled service to Nantucket. When the weather closes down in the Northeast, Linear Air does seasonal service in the Caribbean, in a migratory operation reminiscent of the late Provincetown-Boston Airlines and, more recently, Cape Air.
It is adding the Eclipse to its stable and expects to grow its VLJ fleet to 30 within the next two years, allowing the company to expand its existing propjet service with point-to-point, 500-mile regional networks around major metropolitan areas. A second Eclipse joins the fleet in October and another two by the end of the year. Its goal is 300, operating in 17 markets nationwide within five years.
Piggy-backing on its current business puts it well ahead of the game, especially since he has a database of 10,000 people to whom to market. While only 1,200 of those are current Caravan customers, he expects that to increase once the Eclipse 500 comes on line. “They will get the higher speed jet engines for the same price,” he said. "We’ve got people chomping at the bit, asking us everyday when the jet is going to fly. There is a tremendous amount of pent-up demand." Interestingly, he said the average passenger load on a whole-plane charter is about three or less passengers, exactly the size of the Eclipse and consistent with most jet charters.
“What it comes down to is not how many passengers you have but the number of hours the aircraft is used,” he explained. “The average charter aircraft is used about 300 to 500 hours annually, largely because the aircraft is not available from owners during peak travel times – Thanksgiving, Christmas, New Years, Memorial Day, and July 4. That ends up dampening the utilization for charter purposes. These jets are owned by someone who has no profit motive, but just may want to recoup the cost of aircraft operations. The same applies to charter aircraft companies. If you own and control the aircraft you control 100 percent of the capacity. While you are on the hook for lease payments you can price for cost recapture and profit incentive which automatically increases utilization.”
Herp is counting on what he calls the “Ah ha” moment which he has seen again and again with the Caravans. “Once they experience a great flight on a private aircraft they move to do whole-plane charters,” he said. “They understand the value proposition of chartering an aircraft. Ninety percent of our revenue comes from the whole-plane charter of a Caravan.”
Herp noted that value proposition was more than the FBO, convenient ground transport or aircraft experience but extended to the increased productivity as well as the cost savings affording from the ability to travel out and back in a day. “All that is a compelling argument for early adopters,” he said. “To get from Elmira, N.Y. to make a connection through Newark you have to get to the airport a 5 a.m. which means getting up a two or three am, traveling to the airport, going through security and then repeating the process so you get home at 11 pm and that is assuming no problems, all for about the same price as using one of our aircraft. The Eclipse is a game changer, a great economic platform for that type of activity.”
He noted there was seasonality to operations with July and August clocking 100 hours per month on the Caravans which now fly between 600 and 700 hours annually. “Eclipse is a better platform and is not so subject to the leisure cyclicality so we expect to use it year-round up to about 960 or 1,000 hours per year,” he said, noting that NetJets currently operates its aircraft about 1,200 annually. “That is well above the average for the charter model. Our Caravans are now about 20 percent less than that. Pogo [a developing per-seat, on-demand company] and DayJet say they will be trying to get to 2000 hours.”
Herp said that was impractical because of the short-haul nature of the business. “There are only so many legs you can do in a given time period,” he said. “Most flights are 45-90 minutes so it will be difficult to do,” he said, adding that DayJet is like a mini regional airline and could be able to do it. The challenge is having to operate in that gray area. You can’t do Part 121 with Part 23 aircraft and the only existing structure under which you can do it is on-demand.” But FAA is working on commercial regulations for this market. (See related story FAA Confirms Commercial VLJ Regs)
Herp sees the biggest challenge to on-demand services and the explosion of VLJs is corporate travel departments used to scheduling clients on commercial carriers. “They focus their sales and marketing on individuals,” he said. “We focus on the decision makers – advertising and real estate executives, private security and investment analysts, marketing firms who understand the competitive advantage of using on-demand services instead of commercial flights.
“It is easier to get real estate developers and their architects and other personnel to a new project with on-demand than with commercial flights,” he continued. “We’ve marketed to corporate travel departments and do not figure the traveler’s time as part of that cost. They report to the CFO who is focused on cost containment and they are definitely not ready to make purchase decisions like this. We’ll continue their education but it will be some time before they get the value proposition of what we do. It is the early adopters – the people who are both decision makers and travelers – who can justify the switch from an airline seat to a charter.”
Herp noted that it is really the engine technology that is driving VLJs, a reprise of what happened with the advent of regional jets. During the 1980s, the most economic aircraft to serve commuter markets were turboprops. Then in the late 1980s, Shorts Aircraft, capitalizing on new, small jet engine technology, announced they were working on a regional jet. The announcement was stunning not only because it broke with conventional wisdom but because of who was proposing this radical change in airline service. Shorts Aircraft was better known for its unpressurized aircraft which most people saw as putting wings on the box it came in. The engine technology that afforded economic regional jets is now being repeated with the advent of VLJs and if the success of the regional jet is any indicator, they should do well.