Joining the Club Membership: the New Access Paradigm
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JOINING THE CLUB MEMBERSHIP: THE NEW ACCESS PARADIGM by James Wynbrandt n not even five years since their inception, membership programs have created a new class of business aviation access while changing charter industry practices and perceptions of cus- Itomer habits (for example, travelers’ willingness to share the cabin of a business jet with strang- ers). These programs often have little in common besides providing access to a closed fleet, and range from relatively low-cost subscription access “private” airlines to traditional operators of ultra-long-range jet fleets. The companies highlighted here are at the forefront of defining and expanding these new access paradigms. www.ainonline.com Surf Air from Rise added to its rolls, Surf Air now has Commencing scheduled service in 2013 with a 3,850 members. fleet of PC-12/12NGs, California’s Surf Air was The Rise acquisition is intended to fuel rapid the first subscription membership “private air- expansion of Surf Air’s dozen legacy routes and line” and the model for subsequent monthly, fee- a doubling of flights on former Rise routes, a based, “all-you-can-fly” providers. In June Surf company spokesperson said. Coming soon are Air purchased Rise, its Texas-based clone, and Monday-through-Friday flights linking Califor- concurrently launched service at subsidiary Surf nia and Texas. An in-development premium pro- Air Europe, the two moves seen as validating gram will add weekend service to Cabo San Lucas, the subscription access concept. With 850 users Mexico; Aspen, Colo.; and Sun Valley, Idaho. © 2017 AIN Publications. All Rights Reserved. For Reprints go to AVIATION INTERNATIONAL NEWS • SEPTEMBER 2017 Surf Air More immediately Bentonville, Ark. (home of quickly and experimented with a few different Walmart); Midland, Texas; and Oklahoma City strategies to see what profitably builds the mem- are joining the Texas route network. Additional bership.” The cutback, or “rationalization,” membership programs providing various levels of was in response to recognition “that our mem- access to the network will be created. Eventually bers wanted schedule depth in a few key markets the Rise fleet of King Air 350s will be replaced [rather than] schedule breadth across more mar- by a dozen PC-12/12NGs. Surf Air currently has kets,” the company said. firm orders for three PC-12NGs and options for Surf Air has since reallocated seat capacity to 50 more. focus on the Los Angeles to San Francisco mar- Basic membership ($1,950 per month) pro- kets during the week, while catering to leisure trav- vides access to the basic route network, two res- elers on weekends with flights to Napa, Monterrey, ervations at a time. Preferred ($2,450 per month) Truckee and Palm Springs, and adding service to provides access to the preferred network, four res- Las Vegas from Hawthorne, San Carlos and Santa ervations at a time. Premium ($2,950 per month) Barbara. Since last October the schedule has grown www.ainonline.com provides up to six reservations at a time on the in core markets and restored about 600 monthly premium network, which will include yet-to-be- hours of flying, according to the company, and in launched routes. mid-August it introduced San Diego to the Bay ser- Planned expansion notwithstanding, flights and vice via Montgomery Field. flight hours on Surf Air’s legacy routes declined CEO Jeff Potter, former CEO of Frontier Air- almost 25 percent year over year from July last lines, left Surf Air at the end of May in what he says year through this past June, according to Argus was a planned move, after engineering transfer of International. Surf Air told AIN it reduced fly- operational control of Surf Air’s fleet to Encom- ing in October last year “by about 25 percent,” pass Aviation. Potter told AIN, “I remain Surf Air’s and that “like any young company, we had grown number-one fan.” Chairman Sudhin Shahani has © 2017 AIN Publications. All Rights Reserved. For Reprints go to AVIATION INTERNATIONAL NEWS • SEPTEMBER 2017 Wheels Up taken on the role of CEO. Rise founder and CEO Wheels Up Nick Kennedy is now Surf Air’s president of the Founded in 2013, Wheels Up has experienced Texas and Southeast region. rapid growth, owning 63 King Air 350i twin tur- Meanwhile, Surf Air Europe has taken posses- boprops and 15 refurbished Citation XLS/XLS- sion of its first Phenom 300 (operated by UK- plus light jets (operated by UK-based Gama based FlairJet) and is flying between London Aviation), providing access to members who pay Luton Airport and Ibiza, Spain; and Cannes. a one-time initiation fee and annual dues in fol- Plans call for inaugurating service to Zurich, lowing years. Fixed hourly costs for the King Air Munich, Geneva and Milan from London, and 350i are $4,295 and $7,495 per hour for the Cita- adding four Phenom 300s to the fleet by year- tion XLS. end. Several membership plans are available, In this year’s first half Wheels Up saw 75-per- priced relative to the extent of the service net- cent year-over-year growth, founder and CEO work they access, ranging from monthly Select Kenny Dichter said, and “will exit 2017 with 4,000 subscriptions at £1,750 (about $2,285), Prime active Wheels Up members” and “$300 million- at £3,150 (about $4,110), and £3,650 (about plus in revenue.” The company, founded in 2013, $4,765). In a nod to the shared charter flights will turn Ebitda positive by year-end, and in June www.ainonline.com appearing to gain traction in the U.S., the Euro- received a $90 million forward credit facility from pean branch offers an Anywhere membership, private equity firm KKR for purchase of 17 more which allows crowd sourcing of ad hoc char- King Air 350is, Dichter said. ter flights for round trips, starting at £2,600 per Seeing a powerful, user-friendly digital plat- person. A potential customer sets the time and form as critical to growth, Dichter aims to keep deposits the funds, and Surf Air Europe markets Wheels Up “at the leading edge of technology” the flight. Once six passengers have committed, as it “endeavors to be the world’s best social and the flight is scheduled; if fewer sign on, the ini- aviation company.” Shared shuttle flights are one tiating customer can pay the difference or can- means of strengthening that social component cel the flight. of membership. Routes include New York-South © 2017 AIN Publications. All Rights Reserved. For Reprints go to AVIATION INTERNATIONAL NEWS • SEPTEMBER 2017 50,000 40,000 2015-2016 2016-2017 30,000 20,000 10,000 0 XOJet Surf Air JetSuite Wheels Up 50,000 60,000 Membership Flights Membership Hours 50,000 40,000 2015-2016 2015-2016 2016-2017 2016-2017 40,000 30,000 30,000 20,000 20,000 10,000 10,000 0 0 XOJet Surf Air JetSuite Wheels Up XOJet Surf Air JetSuite Wheels Up Source: Argus 60,000 Florida; New York-Nantucket; Boston-Nantucket; “waiting to see how Brexit” affects business avia- and50,000 in the winter, San Francisco-Truckee, Calif. tion on the Continent. Executive v-p and found- During football season, Saturday2015-2016 shuttles to col- ing partner John Colucci is based in Europe, and 2016-2017 lege40,000 games are popular, as were shuttles between with fleet operator Gama Aviation headquartered California and Reno during the Burning Man fes- in Farnborough, UK, whenever conditions war- tival,30,000 Dichter said. rant “we have a plug and play” offering ready to Meanwhile, Wheels Down, the on-the-ground go, Dichter said. 20,000 events program, is key to driving more socializa- Individual memberships carry a $17,500 ini- tion10,000 and asset utilization. Wheels Down’s “tent tiation fee for the first year and $8,500 per year pole events” are the Super Bowl, Masters Golf thereafter. Corporate memberships cost $29,500 Tournament0 XOJet and ArtSurf Basel, Air duringJetSuite whichWheels theUp for the first year and $14,500 per year thereaf- company hosts parties, meetings with celebrities ter. The entry-level “8760” program costs a flat and other insider opportunities for members, fur- $6,950 per year. ther driving fleet utilization and creating a sense of community. Wheels Up offers free empty legs. XOJet One indication of the intent to mainstream its XOJet introduced a new charter model in 2009, offering: Wheels Up memberships are sold in offering low (then starting around $20,000), one- Costco, and during “key time periods” at other way transcontinental rates aboard its owned and warehouse stores. operated fleet of Citation Xs and Challenger 300s. Corporate sales are the next growth frontier. In the years since, XOJet has de-emphasized ad Wheels Up has 200 corporate accounts and hoc charter in favor of membership programs, and www.ainonline.com is “committed to a big push” to “double that is now going all in on the new paradigm: “We’re over the next 18 to 24 months,” Dichter said. changing to a subscription model,” said XOJet Current accounts use Wheels Up primarily to CEO Brad Stewart. “That’s worth carefully explain- supplement corporate flight departments, sec- ing.” To whit: The platform XOJet developed and ondarily as an alternative to airlines, or lastly provides exclusively for program members “costs among small to medium-sized businesses for all money, so we say to the client, ‘If you’re a mem- corporate lift. ber, we need you to pay for the platform,’” Stew- Expansion into Europe, initially targeted to art said. Most customers have accepted the change launch this year, is on hold.