HOW SOCIAL FLIGHTS PLANS ON USING THE POWER OF SOCIAL MEDIA TO FILL UNUSED PRIVATE CHARTER JET SEATS

Now that people can organize themselves online, private air travel isn’t just for the wealthy anymore.

Facebook CEO Mark Zuckerberg likes to say that social dynamics are going to work their way into every industry, and the companies of the future will be the ones that bake them in from the beginning, rather than slapping them on as an afterthought. This series takes a look at companies that are discovering new opportunities by using social components in the foundations of their businesses.

Have you ever wanted to take a quick weekend trip to some out-of-the-way place, but canned the idea because there was no practical way to get there without having to make a connection or two followed by a long drive--all of which would have eaten up half your weekend? Social Flights, a new company that is using the social web to fill up private planes, is betting you’re not the only one.

The founders of Social Flights believe that, if you had the chance to grab a seat on a private plane that would fly point-to-point, as the wealthy are able to do today, and the cost of your seat was comparable to what you’d pay to fly commercial, you’d grab it.

The idea behind Social Flights makes sense.

The social web gives people the ability to self-organize. Why not allow them to self-organize into groups of people that want to fly to the same place at the same time?

Weekend getaways aren’t the only use envisioned for the new service, Chief Innovation Officer Dan Robles tells Fast Company. The company also sees applications for business travel, where executives often waste countless hours wending their way to meetings via commerical aviation’s hub-and-spoke system.

 

Until now, however, the idea simply wasn’t feasible. Brokers, who arrange charter flights, have historically focused on wealthy individuals and companies, because the brokers could only sell whole planes, and those were the only groups that could afford to shell out the bucks.

But now with the social web, people don’t have to rent the whole plane. A member of Social Flights can simply post an itinerary they'd like to take. If enough other people want to travel to the same place at the same time, a plane gets booked, and each flyer simply pays the cost of their seat.

Social Flights soft-launched at the end of February and so far has arranged about 12 flights, CEO Jay Deragon tells Fast Company, including about 90 Mississippi State football fans who flew in three planes from Jackson, MS, to Jacksonville, FL, for a bowl game. The cost was about $350 per person, Deragon says, compared to the $500-$600 it would have cost to fly commercial, not to mention the time they saved--and possible hotel overnights--by flying direct.

Deragon says the number of trips booked through Social Flights will ramp up as individual locations get critical masses of customers, a process he says should take about 18 months. People have started to sign up in about 30 locations so far, including San Francisco, Los Angeles, Denver, Charlotte, Charlottesville, Nashville, Memphis, and Detroit.

The idea doesn’t just appeal to travelers. It’s also attractive to charter companies. On any given day, 60% of the country’s 15,000 top-rated charter jets go unusued. And of the 40% in service, about a third travel empty during their one of their legs.

“Most people don’t think of the social web as anything more than a marketing scheme,” Deragon says. “But there is so much waste that can be eliminated by using it.”

COMMENTARY:    This is a very interesting concept, but if 60% of the country's 15,000 private charter jets go unusused, this indicates either over-capacity or inefficiency in the industry or both.

I justed checked the U.S. Air Carrier Traffic Statistics Through February 2011 by the Bureau of Travel Statistics (BTA) and this is how non-scheduled (chartered) airlines compared with commercial scheduled airlines:

         

In terms of the four key airline metrics this is how private chartered jets faired:

• Revenue passenger enplanements = 0.008
• Revenue passenger miles = 0.0135
• Available seat miles  = 0.0194
• Passenger load factors = 56.93

I calculated the average number of passengers flown per private chartered jet, and this works out to 2.74 passengers.  I obtained this number by dividing the number of passengers flown by private chartered jets (5,913,000), and dividing this by the number of jets utilized (15,000 x .40). Thusly,. (5 913 000 / (15 000 * .40)) / 360 = 2.7375

Definitions:  

• Revenue passenger enplanements (RPE) - The total number of passengers boarding aircraft. Includes both originating and connecting passengers. 2) Total number of revenue passengers boarding aircraft in scheduled service including origination, stopover or connecting passengers.
• Revenue passenger miles (RPM) - A measures of traffic for an airline flight calculated by multiplying the number of revenue-paying passengers aboard the plane  by the distance traveled.
• Available seat iles (ASM) - A measure of an airline flight's passenger carrying capacity.  It is equal to the number of seats available multiplied by the number of miles flown.
• Passenger load factor (PLF) - A measure of the amount of utilization of the total available capacity of a transport vehicle.

So what does this all mean?  It means that the private chartered jet business is a very low volume, underutilized, and mostly unprofitable business.  The load facter for private charter jets is 56.93, meaning that less than 60% of the available seats on private charterted jets are filled with a paying passenger.  

Private chartered jets hold between 4 and 12 passengers.  How can private chartered jet companies make money when they fly only 2.74 passengers per flight.   These companies have to be careful they do not operate a flight below the breakeven point.  They have to skillfully adjust their passenger flying costs per hour ($1,150 to $5,200 per hour depending on the aircraft) and organize their flight schedules to make sure they fill those seats so they can generate a profit.  According to New Flight Charters, the average operating cost per flight for large charters averaged about $46,000.  How they are able to do this, when there are so many variables is anybody's guess. 

The key variables in the private chartered jet business is passenger demand, passenger flying costs per hour, and the cost to operate each flight.  Whether Social Flight can increase demand using their business model remains to be seen.  Their CEO claims their will need 18 months to reach "critical mass".   The company is going to have to be very picky about where they fly from. Ssince they launched in February 2011, their results have been hardly spectacular.     

In my opinion, Social Flight should concentrate on the scheduled airline segment where load factors average about 82%, so there is still room to grow.  There's a hell of a lot of unfilled seats on scheduled airlines, millions and millions more.  The scheduled airline segment also has much more traffic than non-scheduled.  In order to do this, they will need to partner directly with the airlines, matching passengers by point of embarkation and destination.  If there is sufficient chartered aircraft at those points of embarkation, this could be a great way to upgrade them and use some of that under-utilized capacity.    

I do love their commercial though, especially that native American indian music:

 

Courtesy of an article dated May 17, 2011 appearing in Fast Company 

 

 

 

 

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