POGO to Launch in 2009

More details of Pogo Jet’s plans are emerging from its initial public offering filed with the Securities and Exchange Commission last month, including its plans to launch a per-aircraft, on-demand service in the first quarter of 2009, operating 25 VLJs by the end of that year and 100 by the end of...

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More details of Pogo Jet’s plans are emerging from its initial public offering filed with the Securities and Exchange Commission last month, including its plans to launch a per-aircraft, on-demand service in the first quarter of 2009, operating 25 VLJs by the end of that year and 100 by the end of 2011.
The IPO included information on an expired 10-aircraft agreement for the purchase of Eclipse 500s at $1.9 million per aircraft. It hopes to hammer out a new contract once the offering is complete. Related Story
The net proceeds of the IPO will be used to fund aircraft purchase deposits as well as progress and delivery payments for the aircraft. Any remaining net proceeds will be used for working capital and other general corporate purposes, including capital expenditures for the build-up and maintenance of operating facilities.
Its authorized capital stock consists of 200,000,000 shares of common stock, $0.01 par value per share, and 10,000,000 shares of preferred stock, $0.01 par value per share. The company is hoping to raise $103,500,000 for aircraft and for about 30-months of working capital.
Managed by WR Hambrecht & Co., the offering will be made through the OpenIPO process, in which the allocation of shares and the public offering price are primarily based on an auction in which prospective purchasers are required to bid for the shares. Once the auction closes, the underwriter will determine the highest price bid, setting that as the price for all of the shares offered.
Initial capitalization for Pogo Jet came from $12 million in three rounds of private placement equity financing. The company has already invested about $7 million in the start-up and now has a $5.75 million as of June 30. See the balance sheets at the end of this report.
At June 30, it had cash and cash equivalents of $6.38 million, compared to $7.22 million at December 31, 2006 and $7.51 million at June 30, 2006. Under the current business plan, it anticipates generating positive operating cash flows in the third quarter of 2010. As a developing company, it has incurred a net loss of $0.80 million and $0.68 million for the six months ended June 30, 2007 and 2006, respectively, and a net loss of $1.27 million, $1.63 million and $1.85 million for the twelve months ended December 31, 2006, 2005 and 2004, respectively.
Once the offering is complete, it expects to devote its resources to negotiating agreements for the purchase of Eclipse 500 and related support services; obtaining aircraft financing; entering into a long-term lease agreement for facilities at Westover Metropolitan Airport; obtaining all necessary approvals and certifications from the FAA and DOT; developing and building information technology infrastructure; hiring additional managers; and hiring and training pilots and maintenance technicians. It expects to operate under Part 298 of DOT’s Regulations and obtain FAA certification under Part 135, both expected by the fourth quarter of 2008.
The Eclipse will be used for initial operations. “Launching with a single aircraft type will allow us to optimize our network efficiency – the percentage of total flight hours which generate revenue –simplify training requirements and gain scale efficiencies in parts and tooling,” it said. “While its passenger carrying capacity is less than some other proposed VLJs, the compact size and the low purchase and operating costs of the Eclipse 500 aircraft are keys to our low-cost operating strategy.” However, its capacity perfectly matches the average passenger load on a whole-plane charter at about three or less passengers.
Pogo Jet previously chose the Adam Jet for its operation before pulling back in June 2006 but the seeds of the change may be in the fact the company cited the current list price of an Eclipse 500 VLJ at about $1 million less than the price of the other currently available VLJs. It also cited the lower operating costs of the Eclipse owing to its lighter weight and efficient design.
“We believe that we can use a large fleet of aircraft from our centrally located base of operations to deliver faster, more consistent service to customers,” it said. “High utilization should enable us to optimize revenue per aircraft, serve more customers and spread fixed costs over a greater number of revenue flights.”
It called the Eclipse 500 the first aircraft that has been certified by the Federal Aviation Administration within a new generation of private jet aircraft known as VLJs. However, the Cessna Mustang has also been certificated, although it is being marketed more for the owner operator than such operations as Pogo Jet and Day Jet.

Milestones
Pogo Jet recounted the milestones it has achieved since work began four or five years ago, including moving its offices from a proposed base in Connecticut to Chicopee, Mass. at Westover Metropolitan Airport which will house administrative, operating and support systems. It has also developed its operating plan, assembled a management team with extensive experience in the air transportation industry, and negotiated the principal terms of the initial delivery of VLJs.
With Former AMR Chair Robert Crandall at the helm as its chair and chief executive officer, company management includes Executive Vice President, Operations Michael Stuart, who formerly served as senior vice president of flight operations at Comair, Inc., and Senior Vice President of Customer Service and Pricing Michael Baur, who formerly served as vice president of NetJets, the country’s largest fractional jet service provider. Other members of senior management team combined have over 55 years of investment banking and consulting experience focused in the aviation, aerospace and transportation industries. See sidebar below. Similar operators are also tapping the expertise of regional airlines with Comair vets at Day Jet as well.
Crandall’s previous expectations had been such a service would be unlikely to impact scheduled service, but now the company is clearly hoping to capitalize on the growing discontent of airline passengers – especially those from the front of the aircraft. "We are not talking scheduled service and we are not talking service to major airports," he said in a 2006 interview. "We are not talking prices even remotely competitive with scheduled service. So, I do not see these services as any threat to scheduled services." Related Story
Pogo Jet expects to combine many operational practices of scheduled airlines with the convenience of personalized, on-demand jet charter operations. Its service will initially cover the Northeast, Mid-Atlantic, Ohio Valley and Carolinas, which, of course, includes such major metro areas as New York City, Philadelphia, Washington, DC, Boston, Cleveland, Cincinnati, Pittsburgh, Detroit, Toronto, Montreal and Charlotte. In addition to siphoning passengers from current charter operators, it also expects to expand the market to affluent travelers not now using private aviation. “In addition, we believe that the advantages of our service will attract dissatisfied commercial airline travelers,” said the filing. “We plan to offer many travelers greater convenience, reduced door-to-door travel times and a variety of service improvements by providing direct, point-to-point travel, eliminating time-consuming connecting flights; delivering a personalized, consistent flight experience; facilitating travel through hundreds of convenient, local general aviation airports; reducing airport check-in times; and avoiding security delays.”
The operation also will be different from that of scheduled airline carriers in that it requires less airport infrastructure than scheduled airlines which require investment in ticket counters, gates, baggage areas, aircraft parking facilities, support equipment, and personnel, not needed by Pogo Jet.

Growth of Private Aviation
Citing the growth of general aviation, the company said it believes that demand for private aviation services and the limitations associated with both private aviation and scheduled airline service alternatives that are currently available in its target service area create a market opportunity.
“The number of active twin-engine private jet aircraft grew from 6,215 aircraft in 2000 to 9,097 in 2005,” it said, citing General Aviation Manufacturing Association statistics. “Of these total numbers of private jet aircraft, 638 were available for charter in 2000 and 1,939 were available for charter in 2005, an increase of 204 percent. During this five-year period, annual on-demand charter hours flown by private jet aircraft increased 190 percent, from 306,000 hours to 890,000 hours. Private aviation services include travel by owners of their own aircraft, owners of fractional interests in aircraft, jet card program customers – who typically pre-pay for a fixed amount of charter travel – and traditional jet charter customers, who secure private jet transport on the basis of an individual trip or itinerary.”
It also cited limitations of current services including the high cost, administrative complexities and inconsistent performance, saying an opportunity exists to accelerate future growth by addressing these problems.


Pogo Jet also cited the increasing consumer dissatisfaction with “time-consuming check-in and security requirements, low levels of customer service and travel delays associated with much of the scheduled commercial airline market.” It quoted the Bureau of Transportation Statistics report that in 2006 and in the first six months of 2007, major U.S. commercial airlines were delayed at least 25 percent of the time, adding that 40 percent were weather related with the rest associated with airport congestion, including terminal bottlenecks, and crowded taxiways and runway access.
“These delays and inconveniences would be significantly reduced through our planned service,” it said. “An additional limitation of scheduled commercial air travel is inconvenient routing, especially for regional travel, which can often involve time-consuming connecting flights. Point-to-point travel within our target service area is not widely available for users of scheduled airline services. Less than one-third of all routes involving service between the 76 commercial airports within our target service area had non-stop service, according to the Official Airline Guide. Accordingly, air travelers whose final destination is not within the immediate proximity of a major airport hub frequently face lengthy layover delays, overnight stays and connections through crowded airport hubs. When these existing travel inconveniences are considered in total, we believe consumers will seek, in increasing numbers, an effective, time-efficient alternative to existing forms of transportation.”
Pogo noted that in 2006, approximately 24.7 million airline passengers used scheduled flights between the 76 commercial airports in its target service market, of which about 2.6 million paid an unrestricted coach or business fare, according to data published by the DOT and the Official Airline Guide. “These travelers represent a significant potential target market for our service,” it said, adding passengers would come from those who currently use surface transport as well as those who currently do not travel at all because of the hassles associated with it and the high cost of existing private services.
Its strategy is to provide a consumer value proposition – providing consumers with a lower-cost, easier-to-book, and more consistent jet charter service experience, offering greater convenience and service than scheduled commercial airlines; eliminating connecting flights for many scheduled airline travelers; minimizing many common forms of pre- and post-flight delays for travelers; and reducing door-to-door travel time for many travelers.
It offers highly personalized, consistent service, ease of scheduling, and lower, transparent all-inclusive pricing. Capitalizing on the seamless service that was so successful in the airline industry, Pogo Jet sees its aircraft and personnel as providing a consistent experience for all passengers.
“Customers will book our service on a per aircraft basis, not on a per-seat basis, and control with whom and when they travel,” it said. “Consumers currently face scheduling inconveniences and logistical challenges from many existing private aviation service providers who need to procure third-party aircraft, schedule contract flight crews and/or fill the remaining seats on the aircraft after an order is placed and prior to confirmation, which can create lengthy delays and scheduling uncertainties for the consumer. In contrast, when a trip is booked by one of our customers, our service will be confirmed immediately.
“Unlike many existing private aviation services, we plan to offer an all-inclusive pricing structure that is straightforward and simple to understand,” it continued. “This contrasts with the multiple add-on costs that are charged by many other private air charter services. Our customers will not be charged for additional fees, such as positioning fees, landing fees, ramp fees, fuel surcharges and overnight charges for the crew, over and above the quoted trip price. We believe that we will be able to offer travelers greater convenience and lower prices due to our planned low-cost structure, relative to existing private aviation services.”

Operations Plan
Its base at Westover Metropolitan Airport, a joint military and civilian field, was chosen because it offers convenient access to the target market region Pogo Jet intends to serve, low-cost office, hangar and aircraft parking facilities to support the operations of a large fleet. It also has multiple runways to reduce the risk of an airport shutdown. The area also features a reasonable cost of living, a ready pool of highly trained Air Force Reserve pilots and maintenance technicians currently based at Westover.
All pilots will be full-time, salaried employees, living in the area of the main operating base. It plans two-pilot operations with pilots in command having an Airline Transport Pilot rating and type-certification for the Eclipse. All second-in-command pilots will have at least a commercial, instrument, multi-engine rating. Flight training initially will at Eclipse Aviation, but Pogo intends to move all training in-house. Pogo Jet will make use of PC-based training technology acquiring a flight training device or full motion simulator to support its training program. It also allows pilot better quality of life, the company said, since they will return home each night, limiting hotel and per diem expenses. Pilots will receive extensive initial training and recurring training on the Eclipse 500 as well as training in service delivery, CPR, first aid and safety. The use of a single aircraft type means flight training and procedures will be standardized.
Key to its operations will be the development of a high quality maintenance program in coordination with Eclipse Aviation as well as reserving a portion of the fleet as spare aircraft to react to unplanned maintenance events. Pogo is planning to hire maintenance technicians to serve its fleet of Eclipse 500 aircraft. All technicians will receive aircraft-specific training focused on the Eclipse 500 as well as recurrent training in maintenance, safety and first aid. Most maintenance will be performed overnight at Westover, thereby optimizing aircraft availability during peak travel hours. Its maintenance program will adopt best-practice standards similar to those employed by the scheduled airlines and will be designed to minimize maintenance down-time.
Its system operations center will be the focal point for all flight activity. Personnel will direct and coordinate all responses to customer service needs and will control maintenance, flight planning and pilot scheduling. Flight planners will monitor current and forecast flight conditions and generate flight packages to assist the crew. This operation is similar to procedures used by major scheduled airlines and large fractional jet service providers and enhances the safety of the operation by providing qualified people to assist flight crews with important decisions. It also increases utilization of pilots and aircraft because the systems operations center can perform many routine preflight functions for the flight crews and minimize time between flights.
For each flight, a cross-functional team, consisting of a customer service representative, an aircraft maintenance representative, a flight planner, a scheduler and the aircraft’s captain, will assume responsibility for all details necessary for flight. They will monitor the status of the designated aircraft and pilots, adjust for any changing variables, and communicate with the customer. This team will also coordinate any requirements, such as fuel, at the airports. Pogo anticipates annualized flying rates in excess of 2,000 flight hours per aircraft by the end of the third year of operations, rather than the typical annual flight hours of between 350 and 400 for other light jets. Pogo also noted that a light jet in a fractional ownership program flies 1,100 to 1,200 flight hours per year, and the typical regional airline jet flies 3,000 or more flight hours per year.

Sidebar
The Executive Suite
Robert Crandall has been chair since March 2004 and chief executive officer since July 2005. He currently serves on the board of directors of AirCell Inc., Anixter International Inc., Celestica Inc., and the Halliburton Company. He also is a member of the FAA’s Management Advisory Committee. From 1985 to 1998, he served as the president, chief executive officer and chair of the board of AMR Corporation, the parent company of American Airlines. Crandall is a graduate of the University of Rhode Island and earned an M.B.A. from the Wharton School of the University of Pennsylvania.

Michael Stuart serves as executive vice president, operations. Prior to joining Pogo Jet, from July 1980 to April 2007, Stuart rose through the ranks at Comair holding the positions of line pilot, director of operations, and senior vice president of flight operations. Stuart also served as a captain on the CRJ-700 Regional Jet and as a consultant. Stuart has an Airline Transport Pilot certificate with more than 7,000 flight hours and has been qualified as a captain on numerous aircraft. He began his flying career in the U.S. Air Force flying the B-52. Stuart earned a B.S. from the University of Tulsa.

Cameron Burr serves as executive vice president, corporate development, a role he assumed in February. Before that he served as president from July 2005 to January 2007; as executive vice president from March 2005 to May 2005; and as president from March 2004 to February 2005. Before joining Pogo Jet, Burr was managing partner of The Burr Group, a Connecticut-based investment bank and private equity concern focused on the global transportation industry that he co-founded in 1992. Burr earned a B.S. in Economics from the University of Texas at Austin.

David Leblanc began his duties as chief financial officer in July 2005. From April 1998 to February 2004 and from May 2005 to July 2005, he was a managing partner of The Burr Group. Before joining The Burr Group, Leblanc worked with First Equity Development, Inc., an aviation investment banking concern in Westport, Connecticut. While at First Equity, he was the lead advisor for the sale of Atlantic Aviation to Legg Mason Merchant Banking Group. Leblanc earned a B.S. in Management Systems from Arizona State University and an M.B.A. in both Finance and Strategy from the Yale School of Management. He also completed the advanced program in International Business with a Finance concentration from Arizona State University.

Travis Allen began serving as senior vice president of planning and administration in February, before which he was vice president, operations and director, program management. Prior to joining Pogo Jet in April 2004, Allen served as a senior manager at The North Highland Company, a consulting firm; and as an independent consultant. He also served as senior manager Deloitte Consulting where he focused on transformation and technology implementation projects across aerospace, consumer goods, retail, telecom, and public sector clients. Allen began his career as a commissioned officer in the U.S. Navy, where he served for eight years as a carrier aviator and adversary flight instructor. During these tours, Allen also filled squadron-level leadership roles in operations, safety, maintenance, and administration. He is a commercial pilot with single and multi-engine ratings. Allen earned a B.S.M.E. from the University of Texas at Austin and an M.B.A. from the University of North Carolina at Chapel Hill.

Michael Baur serves as senior vice president of customer service and pricing and has since February. Before that he was vice president, planning. Prior to joining Pogo Jet in April of 2004, he spent 14 years at NetJets, Inc, where he held various positions of increasing responsibility, culminating in the office of the chair as vice president, special projects. Baur earned a B.S. in Aviation from the Ohio State University College of Engineering and an M.B.A. from the Ohio State University College of Business.

Julian Robertson, who joined the board in 2005, is chairman and chief executive officer of Tiger Management, LLC, a New York-based investment firm he founded in 1980. In 1996, Robertson and his wife, Josie, founded the Robertson Foundation to focus on large-scale, domestic, high impact grants in education, environment, religion, and medical research. Among the foundation’s major initiatives are active support of New York City’s public education reform, a merit-based scholarship program at Duke University and University of North Carolina at Chapel Hill, and market-based solutions to combat global warming. Mr. Robertson is a member of the board of trustees of the Rockefeller University; Environmental Defense; Wildlife Conservation Society; and the Cathedral Church of St. John the Divine. He is also vice chair and former president of the board of trustees of the Cancer Research Institute; and a member of the Executive Committee of Lincoln Center for the Performing Arts and of the National Board of Advisors of the Children’s Scholarship Fund. Robertson earned a B.S. from the University of North Carolina at Chapel Hill.

David Hurley, who joined the board in 2002, has over 40 years experience in aerospace and telecommunications operations, marketing and sales. He holds an Airline Transport Pilot rating and spent three years in the Special Services Branch of the U.S. Army before serving as regional vice president for Cessna Aircraft and then executive vice president, domestic and international sales for Canadair Challenger. Hurley founded Flight Services Group in 1984, which he sold to PrivatAir in December 2000. He was CEO of PrivatAir from December 2000 to February 2003, and subsequently has served as vice chair. Hurley serves on the boards of Genesee & Wyoming Inc., Hexcel, Inc., Ionatron Inc., ExelTech Aerospace, Inc., Corporate Angel Network, and CAMP Systems. He is chair of the board of The Smithsonian Institution’s National Air and Space Museum.

Gladstone N. Jones III joined the board in 2006, is the founder of and has been a partner at Jones, Verras & Freiberg, LLC since 1994. In 1999, Jones founded and became chair of North South Trading Partners, a holding company with investments in oil and gas, real estate and a variety of other interests. North South Trading Partners serves as a consultant for Gilder for Growth, a family holding company founded by Richard Gilder of the investment firm Gilder, Gagnon and Howe. Jones is a graduate of Mississippi State University and Tulane University Law School.

Michael Moriarty joined the board in 2007, is the founder and chief executive officer of Teewinot Funds, L.L.C., a global investment fund started in 2003. In 1991, Moriarty founded MJM Partners, L.P. a private investment partnership. He continues to manage the investment activities of MJM Partners, L.P. as its general partner. He also currently serves on the board of directors of Amba Investment Services Limited, a specialized provider of investment research and analysis support services. Moriarty earned a B.A. from the College of the Holy Cross.