comscore Airline banks on a buffet-style business model | Honolulu Star-Advertiser

Airline banks on a buffet-style business model


BURBANK, Calif. » Meticulous, well-thought-out plans might be for some people but not Wade Eyerly. At 16, he walked into the registrar’s office at the University of Central Missouri, not knowing he was supposed to have applied for admission. He walked out with a schedule of classes.

After arriving in Washington, jobless, he landed a position in Vice President Dick Cheney’s press office, followed by stints in Iraq as a government operative and in Washington as a National Security Agency consultant.

This all helps to explain why Eyerly, while projecting a Ferris Bueller-like certainty that everything will always work out in the end, eschewed graduate school at Stanford to start an airline.

With Surf Air, Eyerly is bringing what he calls the all-you-can-eat-style pricing plan of the local gym or Netflix to air travel — pay a membership ($500) and a monthly fee ($1,650) and fly as often as you like on six-seat, single-engine turboprops.

Surf Air started flying in June, with service between smaller airports in Burbank, Calif., and San Carlos near Palo Alto, tapping into those who do business between Hollywood and Silicon Valley and would prefer to do so without the hassles of major airports. It added service last month to Santa Barbara, Calif., and is considering additional destinations by the end of the year.

If it looks as if he is flying blind — a novice businessman diving into an industry that is plagued by contractions, mergers and failed enterprises — Eyerly views his fledgling Surf Air as an opportunity to fundamentally change the way business travelers fly.

It is a pitch to certain kinds of decision-makers — the small-business chief executives, those who have not yet made their fortune but are intent on making their mark. For his customers, Eyerly hopes Surf Air can be an incubator of ideas, where flights can be dinner parties in the air, where the membership can be a Facebook for entrepreneurs.

If the business model works in California, with expansion to places like Palm Springs and Lake Tahoe in mind, it will work in more than 50 markets around the country, he said.

"Forgive the Kansas City reference, but it’s Bo Jackson at the plate," Eyerly, a 34-year-old Kansas City native, said, referring to the former Royals slugger. "It’s a home run or a strikeout. It works or it doesn’t. If this doesn’t work in a year, 18 months, we’ll know. It won’t drag out."

Surf Air has raised about $11 million in capital, Eyerly said, from investors that include Velos Partners, Base Ventures and Anthem Ventures, as well as actor Jared Leto and developer Rick Caruso. The company has 60 employees, 25 of whom are pilots, and three Pilatus PC-12 planes. Its membership is nearing 300, each of whom has made a three-month commitment.

It was not hard to see the lure recently when members arrived and departed from Burbank. It was possible to pull into the small parking lot outside the Atlantic Terminal, which is separate from the main terminal, walk a few dozen steps to the lobby, grab a snack from the concierge cart and walk out on the tarmac to board the plane. There were no tickets, no lines and no body scans. A valet parked the customers’ cars.

"It’s truly transformative for me on several levels," said Heather Rafter, who runs her own small Bay Area law firm but travels frequently to Burbank to do business, visit children in college or attend concerts. She is an elite-level flier with United Airlines and Southwest, but because of early-booking requirements or change fees, her frequent flights are costly, she said.

"My whole brain is thinking differently," Rafter said. "I do business development when I want, I do client meetings when I need to, and if I forgot to come home for my daughter’s swim meet, I just come home without stressing about what it’s going to cost. I feel free in my personal and work life."

For Surf Air, tapping into fliers’ dissatisfaction with the airline industry is the easy part. Making a profit at it is another matter. While Surf Air might be the first to adopt an all-you-can-fly fee structure on small aircraft on a narrow list of routes, others have tried elements of this model with limited success.

"It’s all a great selling proposition," said Robert Mann, an airline industry analyst and former executive who helped American Airlines begin an all-you-can-fly pass in 1981. "The key is very few people make money doing it."

Over the past decade, increased security measures at large commercial airports have spurred a market for frequent fliers looking for an easier way to travel but unable to afford their own plane or a jet-sharing service like NetJets. That market has also been nudged along by Federal Aviation Administration initiatives to encourage the use of smaller, underused airports.

But one recent venture, Avantair, a company based in Florida that provides private small-airplane service, is teetering on the brink of collapse. It has suspended operations amid a pair of lawsuits.

"The issue for Surf Air is, ‘Do they make money at $1,650 a month, and can they satisfy the demand?’?" said Mann, who cited Avantair as a cautionary tale. "It costs far more than you think to provide this service at a profit. The problem in facing growth is you think you’re making money, so you go buy a bigger train set and you realize, wait a minute, we haven’t been making money."

Vijay Vaidyanathan, the chief executive of Optimal Asset Management in Los Altos, Calif., said upon landing in Burbank that his primary concern was "obviously safety," which Eyerly said was a reason he chose single-engine planes and had two pilots — a number of whom are former military pilots — on each flight.

Surf Air was conceived far from business labs. When Eyerly’s younger brother Dave was accepted to pilot school seven years ago, he called Eyerly for advice. Being a pilot was a dream, but jobs were so hard to come by that he did not think it would make a career for him. Then we will start an airline, his older brother told him.

They laughed. And then went about their lives.

But two years ago, they invested $9 to purchase a domain name, Plane Red. It was meant to pay homage to JetBlue, which quickly went from startup to success.

"As it turns out, Plane Red is a horrible name for an airline," Eyerly said. "It sounds a lot like ‘plane wreck.’"

The brothers put up a message on the domain’s home page, saying they were thinking about an all-you-can-fly model for executive aircraft at regional airports. Does anybody care? They sent out a half-dozen emails and a Facebook post, and within six weeks, they had 12,000 responses.

At the urging of a friend who had experience with a startup, Eyerly convened a group of 25 acquaintances, business associates and relatives that included a data scientist, an accountant, a lawyer, a dentist and anyone else with a shred of business acumen. They broke up into working groups on finance, marketing, operations and human resources, among others, and inspected a Cessna 208 at a nearby small airport.

"At the end we said, ‘What do you think? Are we onto something?’" Eyerly said. "The takeaway was not only are you onto something, but five of the people in the room said we will leave our jobs and come work for you. And that’s how we got our management team."

A three-month stint last year at MuckerLab, an incubator for startups in Santa Monica, Calif., helped refine their plans, persuaded them to begin in California and – most important – gave them an entree to venture capitalists.

Listening to Eyerly describe all this, in rapid-fire succession, it is hard at times to remember he is in the airline business. The stream of comparisons – Netflix, luxury cars, Westin hotels, Groupon, time shares in the air, tech startups — conjure up a company that is selling something besides getting from point A to point B.

There is, he acknowledges, still plenty to figure out. It is not a by-the-book operation.

"We’re doing something that’s never been done before," Eyerly said. "We’re learning lessons nobody else knows. We will continue to get smarter than we are today."

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