Posts Tagged ‘business models’

Why I Don’t Talk About “General Aviation” Anymore

Thursday, January 23rd, 2014

Back in the 1950′s, Cessna Aircraft produced this gem… “Wings for Doubting Thomas

This little documentary clearly spelled out the value proposition for Private Aviation 2 generations ago.

I rarely talk about “General Aviation.”

Like most people who read this blog, I’m much more interested in, “Private Aviation.”

You might think quickly that it’s the same, thing, but it’s not. General aviation is broadly defined as as all aviation except for military and airlines. That’s great, but I’m not a, “General Aviation enthusiast.” Frankly I don’t care much about, “General Aviation.” I don’t fly biz jets, cargo, fly much for hire, (Though I have the certificate for, it’s just not a big part of my life these days.) spray crops, perform in air shows, whatever…

While I may aspire to sit in the back of a something with turbines, drinking Cristal… It does not inspire me. I’d rather be up front flying the jet.

Private aviation is the part of civil aviation that does not include flying for hire.”

“In most countries, private flights are always general aviation flights, but the opposite is not true: many general aviation flights (such as banner towing, charter, crop dusting, and others) are commercial in that the pilot is hired and paid. Many private pilots fly for their own enjoyment, or to share the joys and convenience of general aviation with friends and family.”

– Wikipedia

You see “General Aviation,” is doing just fine. Ask anyone running a jet charter business these days. Business is up, folks who choose to afford it are buying jet cards and getting to where they want to go in style, and plenty of people are making a good living helping them get there. I’m fine with all that. “General Aviation,” is not dying. It’s growing.

But “Private Aviation” is the community that inspires me. It’s Private Aviation that’s what we’re really talking about when we fry bacon at Camp Scholler, or eat pancakes at the fly in. The ability to climb into a plane and fly myself and my friends or family someplace is like a magic power.

It’s Private Aviation that we built OpenAirplane to serve.

So you see, I don’t talk much about General Aviation. When I speak to the press about OpenAirplane. I explain that it is a marketplace for Private Aviation. I get asked all the time if OpenAirplane will let them hail a jet like they can hail a cab, or if we can help them charter a flight. My answer is always, “Not yet.” It’s just not the business we’re in right now. There are plenty of smart people working to offer charter for businesses and pleasure. That part of General Aviation is well served. I explain that we are focused on Private Aviation, because that’s where the opportunity lies today to unlock more value than anywhere else right now. General Aviation is a competitive, well served market with a healthy ecosystem. But Private Aviation hasn’t seen much innovation since Cessna commissioned that film. This is strange to me, because GPS, iPads, and composites sure have made it a lot easier. Private Aviation can create entirely new use cases for the over 5,000 airports, thousands of aircraft, and hundreds of thousands of certificates in the wallets of  pilots across the country.

Private Aviation has been in decline since the airlines we’re deregulated in 1978. The value proposition of Private Aviation has been evolving ever since. The industry and the community need to both step up to communicate the value proposition for Private Aviation to a new generation of “doubting Thomases,” updating what you see in the old documentary film above to speak to the value proposition we can offer today.

For most of us, the conversation isn’t about General Aviation, it’s about Private Aviation. Let’s call it what it is. I have no time sit back and complain. I believe we can make it better than ever.

“Moneyball” for General Aviation

Thursday, December 5th, 2013

Flight time is the secret sauce to success.

It’s like getting runs on base.

I wrote that headline because, “Sabermetrics for Flight Schools, Flying Clubs, and Anyone Who Wants to Make A Buck In Aviation,” just doesn’t roll off the tongue.

I find the movie “Moneyball” inspiring. It’s a movie as much about business as it is about baseball. Anyone managing an aviation business can find inspiration here too. Its how the business model of OpenAirplane came to be.

“It’s about getting things down to one number. Using the stats the way we read them, we’ll find value in players that no one else can see. People are overlooked for a variety of biased reasons and perceived flaws. Age, appearance, personality. Bill James and mathematics cut straight through that. Billy, of the 20,000 notable players for us to consider, I believe that there is a championship team of twenty-five people that we can afford, because everyone else in baseball undervalues them.”

– Peter Brand in “Moneyball”

The book, and the movie are the story of how the Oakland A’s, a team out spent and out gunned by it’s competitors, finished 1st in the American League West with a record of 103 wins and 59 losses, despite losing three free agents to larger market teams. They built a championship team like, “an island of misfit toys,” using sabermetrics.

Sabermetrics is the term for the empirical analysis of baseball, especially baseball statistics that measure in-game activity. So let’s look at how this discipline, which demystified the voodoo of the business of baseball, can be applied to the business of aviation.

Jason Blair, former Executive Director at NAFI, has spent a lot of time researching what makes flight operations tick. He offers up what he’s learned in his seminar for industry folks called, “Skills for Flight Training and Aircraft Rental Operators to Increase Profitability.” Using one of the handy spreadsheets Jason has been gracious enough to publish can be enlightening, (sometimes scary) and very useful.

Modeling profitability of rental aircraft yields our industry’s version of sabermetrics. It’s flight time. More specifically, its flight hours flown on an airframe, or utilization that makes or breaks the business. Like the focus on getting on base make a baseball team a winner, optimizing the business on number of flight hours flown by each airframe is the secret sauce to success in flying business.

To grossly oversimplify this…

Fly more hours = make more money.
The cost of getting the airplane doesn’t matter near as much.

Utilization is the single biggest influencer on price and profitability for airplanes. It’s this single metric that has the biggest impact on the business. The effect of utilization is significantly more influential than the effect of the acquisition cost of the airplane.

For example, let’s model utilization vs. cost…

If we decrease the hours flown by 25%, the rate for profitable rental increases by 17.3%. If we increase the hours flown by 25% the rate for a profitable rental falls by 9.4%.

but…

If we decrease the acquisition cost of the airplane by 25% the rate for a profitable rate drops by 3.7%. If we increase the acquisition cost by 25%, the required rental rate also only bounces up by the same percentage.

This example shows the asymmetrical influence flying more hours per year has on profitability and affordability of the airplane.

Flight hours flown per year really is the single most influential metric on the profitability of the business that you can manage. This is why we built OpenAirplane from the ground up to do one thing at scale, which is to drive up the number of flight hours and drive better utilization of the fleet.

Operators who optimizes their business to create more flying hours will win.