Private Air Subscription Model Gains Interest, Poses Challenges

By | May 25, 2016

[UPDATE, June 7, 2017: Surf Air acquired Rise, a fellow provider of private air service. It intends to link its California flight network with Rise’s Texas-focused operation. Surf Air will do away with the Rise brand name, and indicated “no immediate changes to either companies’ flying experience.” An “enhanced” booking platform is in the works. To fund the acquisition, Surf Air raised an undisclosed sum of equity financing from various private investors.]

Private air transport companies come and go. A new crop is focused on the members-only, all-you-can-fly model. Some travel management pros are interested in the concept, but they raised several points of consideration.

Of course, such options must be safe and not prohibitively expensive. Since booking them almost always requires direct channels, what role can travel management companies play? Isn’t submitting the expenses complicated for travelers?

The user benefits are apparent.

To help bring prices within the reach of more business travelers, some shared-use membership programs use turboprop aircraft rather than glitzy business jets. That usually means flying to general aviation terminals or alternate airports, potentially closer to the office or home. Those facilities incur lower operating costs for service providers than big airports. They may come with less traffic or faster security processing.

Users pay initiation and monthly fees but incur no other charges. Customers typically can book a predetermined number of reservations each month. Once they actually fly, they can book additional trips up to their allotment. Corporate membership programs can include a pool of flight passes or allow name changes on those allocated to individuals.

private-air

Born in 2013, Surfair operates 90 scheduled daily flights around California and to Las Vegas. Of 3,000 current members, 1,500 are from about 200 corporate accounts, according to CEO Jeff Potter, a former Frontier Airlines CEO.

Individual Surfair memberships are $1,950 a month. A corporate program runs $1,000 a head per month, with a minimum of four employees. Executives and other air commuters who pay a lot for commercial service and/or deal with more than their fair share of travel frustrations seem most suited.

Some travel managers said the model could apply for frequent travelers on specific routes. “Conceptually, the process is interesting,” said a travel manager at a Bay Area multinational who asked not to be identified. “It’s a ‘status’ thing to be able to fly a personal aircraft.”

Another global buyer, also requesting anonymity, worried about making the right economic decision: “If companies are allowing this, are they putting parameters around it? My concern is that while $1,500 to $2,000 is not a huge amount of money, how do you ensure that a traveler will fly enough to maintain ROI?”

Surfair vice president of member acquisition Justin Hart said a traveler flying twice a month on a route operated by the company could save money versus commercial before factoring in time savings. He noted that last-minute commercial fares are high enough in some markets that just one flight a month on Surfair is cheaper.

Riot Games global travel wizard Sean Parham agreed that’s the case in some markets in which Surfair operates, but not all. Five employees at his Los Angeles-based company live in the Bay Area and commute weekly. They use Surfair for the convenience, but on their own dime. Parham said it’s too much to justify as a reimbursable expense, particularly since there are plenty of commercial options between the two markets with relatively low fares.

Parham is considering a corporate account that would at least give these individuals a discount on their own out-of-pocket expense.

To maximize their investments, Hart said some companies empower admins to determine who can book when they want and who needs permission. In that way, admins can see when employees should use the company’s Surfair membership.

Potter said more than half of the roughly 1,500 Surfair members not tied to a corporate account get reimbursed for individual subscriptions.

Reimbursement is different, since air travel purchases traditionally tie to individual trips. Surfair looks for workarounds. For example, Hart said Surfair enables companies to import information into expense systems. Some users choose to expense the entire month’s fee as one line item. More integration work is underway.

Another concern is buying in to and familiarizing travelers with a program that may not have legs. The subscription approach hasn’t always worked. Surfair’s founders subsequently also founded a similar service in the Northeast. Beacon operated for only a few months between Westchester, N.Y. and Boston before folding. In Canada, Chrono Aviation on its website advertises a monthly membership program for unlimited flying between Toronto, Montreal and Quebec City. It, too, has been discontinued. Company president Vincent Gagnon said that “Quebec people are not ready.”

There also are smaller-scale disruptions to consider. For example, if there is a mechanical issue, a back-up aircraft may not be readily available.

Can TMCs Join The Club?

Another rub is that private air membership services, like most other private air transport, require direct bookings through a website, mobile app or phone call. That keeps data outside of travel management company and corporate self-booking channels.

Marc Casto, president and COO of San Jose, Calif.-based Casto Travel, said his company has clients that make use of the Surfair model and it’s well-received. “That said, integrating them into a managed travel program is a bit more challenging as it is not part of a central reservation system,” Casto said. “Generally speaking, all services are provided only for key principals so it is managed individually rather than on an enterprise basis.”

Hart said Surfair is working with clients on connecting to their T&E systems. He also said agencies can earn commissions on the monthly memberships they bring to Surfair.

Startup Instantair also will rely on direct bookings through its app when it starts scheduled, all-you-can-fly service later this year between Amsterdam and Frankfurt, London and Paris. Inspired to get into this game by Surfair’s success, the company also is talking with TMCs. “You can say we make it so easy to book a flight that you don’t need the agency,” said co-founder Alexander Janssens, “but we cannot always go around the agency because a lot of companies use their agencies for booking hotels, etc. So we are looking to integrate into their current systems.”

Instantair has been customizing plans for corporate accounts with fewer than 500 employees.

Asking The Safety Questions

The new membership programs stress their adherence to safety standards. Proper vetting is top of mind for travel program managers and their companies’ risk and HR departments.

Risk concerns rise when the seller and operator are different entities, often the case in the private aviation market. Smaller facilities conjure up perceptions of lax security.

“When you hear ‘cheaper,’ you have to ask, ‘Why is it cheaper?’ ” said iJet COO John Rose. “What are the safety records of those companies, the airframes they are using and the training of the pilots?”

He didn’t suggest that any particular private transport company or the facilities they use are unsafe. They abide by “strict” U.S. regulations, he said. But as more of these services emerge, diligence is required. Just as companies need safety assessments of commercial airlines around the globe, Rose said he is seeing “the same type of need around private air transportation now that it’s carried down to the next level of being mass-marketed and more affordable.”

The bigger safety issue for Riot Games’ Parham is keeping tabs on travelers. “I don’t have any way to feed [flight itinerary] data into International SOS,” his company’s travel risk management provider, he said.

Additional info: Other all-you-can-fly private air transport clubs are popping up. Among them, in Texas, Rise for the past 10 months has offered members unlimited flights on scheduled weekday service between general aviation terminals at Dallas Love Field and Houston Hobby. The price of a corporate membership depends on how many employees are included. Users book through the Rise website. A mobile app is forthcoming. Rise director of communications and business development Angela Vargo said the company already has flown members on 10,000 trips. Of those, 80 percent were for corporate travelers.

In the Southeast, My Sky’s new membership program initially will serve Atlanta, Charlotte and Jacksonville. Owner Elliott Mintzer said it should be ready for the summer after pre-enrolling a sufficient number of members. Mintzer said the benefit of corporate memberships is name interchangeability.

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