by Todd House

I want to personally thank all of you for your continued interest and support. Each, in your own way, help us advance the cause of easy, safe and affordable regional air travel on YourJet. Much is going on further nudging the big stone flywheel and building its momentum inexorably towards our new goal of launch on 1 June 2008. In the last two weeks, we have modified our business plan and model to allow us to launch YourJet on 1 June 2008 a full year and a half earlier than a November 2009 launch with D-Jets would allow. After much research, thought, consultation with friends, competitors and neutral parties, and discussions with our legal and business partners, we have reconsidered an earlier decision to wait for the D-Jet and begin flying with Diamond DA-42 Twin Stars. Early this year we considered starting the service with DA-42—twin-engine turbo diesel propeller airplanes seating four passengers and cruising at 188 miles per hour. We thought we should wait for the D-Jet to forego the logistics of having two airframes to deal with but there has been a growing chorus of voices around us urging that we adopt the method others are using to launch their services utilizing currently available airplanes.

The reasons include:

• 1. Our venture capital consultants have noted the absence of revenue-generation in our model for two years waiting on the D-Jet to get FAA certification, icing certification, and into consistent production at rates that can supply adequate numbers. Two years burning capital without capital isn’t an option for us.
• 2. Several other companies are already flying using propeller airplanes and, in so doing, have established and expanded their network and customer base, continuously test and refine their business models and, frankly, have proven that air taxi works and that there is indeed a market.
• 3. SATSAir, in Greenville, S.C. is noteworthy for being the first air taxi to fly beginning about three and a half years ago and growing to include 30 airplanes and covering much of the Southeast. They even beat DayJet to market when they expanded into Florida last January. (DayJet, who did wait for their Eclipse 500’s, only began flying passengers about three weeks ago.) Steve Hanvey is the CEO at SATSAir; he started the service with his own Cirrus SR-22 and now flies about 30. Cirrus Aircraft Corporation, the makers of the extremely successful SR-22 bought SATSAir in November 2005.
• 4. Linear Air, in Boston at Hansom Field, has been flying for about two and a half years with a hybrid taxi/charter model operates three Cessna Caravans with four times a week service to Martha’s Vineyard and Cape Cod. Though they too improve their model all the time, they have yet to break even. The Caravan is a great airplane and certified for flight into known ice; but, it is big (8-10 pax) and heavy and slow. And costs a lot more to operate than an SR-22 or a DA-42. Linear anticipates that their first Eclipse 500 will be delivered this year but then it will be winter and there is the problem of ice. The Eclipse 500 was supposed to be delivered fully capable with all of its sub-certifications (like “known ice”, autothrottles, night IFR and so on) but production and certification difficulties have significantly crippled this amazing airplane. Oh, yes, they will be worked out with time but “when” can fail a company operating during short, cold, wet winter days in the Northeast.
• 5. ImagineAir, in Atlanta at the Lawrenceville Airport, was founded by Paul Fischer, a family practice physician who “outed” Joe Camel during the “big tobacco” lawsuits of the last decade. He turned that into money and likes airplanes and air taxi so he founded ImagineAir. Dr. Fischer tapped some of the young ambitious graduates of Georgia Tech to take the leadership of the company while he finances, mentors and, well, finances some more. ImagineAir started flying in April 2007 and has been growing and expanding for six months now using Cirrus SR-22’s (like Steve Hanvey at SATSAir). They have secured 30 million in venture financing recently and hungrily await THEIR Eclipse 500’s. What is interesting about their model beside the fact that it, too, was founded by a physician (who is not a pilot, though), is that they use a per-mile charge method to price their service. But when you read between the lines, they are charging for the entire airplane just like traditional charter.

Now for the outliers: Point2Point and DayJet.

• 1. John Boehle’s company, Point2Point, was founded last year in Fargo, North Dakota with lots of government help—local, state and federal. Since John was intimately involved in a benchmark air taxi proof-of-concept study sponsored by NASA, the FAA, DOT, State of North Dakota and City of Fargo, he was an obvious first-mover. And since he had just finished his graduate aviation business degree at the University of North Dakota (yes, they have a prestigious aviation school in Fargo), he should have had the inside track.

  I think he did and his model was good. What wasn’t so good was his fateful choice of the Cirrus SR-22 (just like SATSAir and ImagineAir). The SR-22 is a great single engine piston four-seat airplane that is reasonably fast, exceedingly safe and easy to fly. But, it is NOT certified for Flight Into Known Icing (FIKI); and, according to my sources, it never will be due to the design of the wing. John knew this so he began flying with SR-22’s and ordered the new Diamond DA-42 just beginning to be delivered last winter. (The DA-42 is YourJet’s favorite choice of airplane for air taxi while waiting for our D-Jets. For all of the reasons we love Diamond, which I will cover in a future note, we love the DA-42 and the D-Jet. I flew the DA42, in London, Ontario last February—it is a dream machine of advanced design, technology and usability. It is a great choice for a air taxi service plying the colder climes of the northern hemisphere, i.e. anywhere in the East north of the panhandle of Florida!) But it is not yet FIKI certified, though it nearly was last December. It would have been were it not for the inexperience of a Circuit City Citation jet’s flight crew who inadvertently activated and then deactivated the anti-ice system on the jet during a cold, wet approach into Pueblo, Colorado almost one year ago. Since the jet was approaching the airport at low altitude in icing conditions and the anti-ice system was off, ice accumulated on the wings, the shape of the airfoil was distorted to the point that it no longer resembled an airfoil, the airplane lost lift, ceased to fly and crashed short of the runway, killing all on board. Ironically, a company Citation following on approach landed without difficulty, not knowing that their Circuit City brethren had crashed. Next, the FAA got nervous; and when the FAA gets nervous, life for everyone gets difficult as it did for John Boehle. In the wake of the Circuit City crash, the FAA suspended further FIKI certifications until they examined the process to be certain that that process itself did not contribute to the crash. That was last December right about the time Point2Point took delivery of its first DA-42—now without its FIKI certification. John and Point2Point now had two airplane types that would be destined to sit on the ground much of the icy cold upper Midwest winter. This proved to be too much for the business bottom line and John threw in the towel about 5 months ago when he ran out of money. So, what is the lesson? It is: he who lives in a cold wet winter, needs airplane that can fly in ice—legally. That means, grasshopper, that the airplanes MUST be FIKI capable and certified for us to take off in known icing conditions. That is why we can’t fly the SR-22 ever or the Eclipse until it gains FIKI certification. Though the DA-42 is not yet FIKI certified, it has completed all of the tests and FAA certification is expected imminently. It is certified for flight into known ice in Europe and Canada. US certification will follow very soon. Since we don’t begin flying until next summer, this will allow for even more time for Diamond to secure the FAA FIKI certification for the Twin Star.

• 2. As for DayJet it is difficult to know where to start. Ed Iacobucci (pronounced “yako bue chee”) founded DayJet soon after Vern Raburn founded Eclipse Aviation to invent VLJ’s. Both guys are visionary and we applaud the Eclipse 500 and the boldness of Ed’s DayJet model. Ed has been working at great expense on DayJet for at least five years. He was retired before then, having sold Citrix which he founded some years before. He decided that he wanted to do something else productive and he knew Vern Raburn. They scratched each other’s backs, as it were, with Ed proclaiming VLJ air taxi the new paradigm in regional air travel which had the intended effect of endorsing Vern’s radical VLJ concept. Further, Ed ordered not one or ten but 240 Eclipse 500 while they were yet a sparkle on the CAD screen! Vern, with his new-found concept-legitimizing order agreed to prioritize deliveries to Ed so that he would have first-mover advantage as copycats were sure to spring up.

  All of this has worked very well for these companies to secure investor confidence and financing. But the snags started with actual FAA certification of the jet, which was delayed several times. This is not at all unusual in the airplane-making business; and, in fact, Boeing just announced last week that, after all, FAA certification of their 787 Dreamliner would be delayed at least 6 months. Boeing has a history of bringing new airplane concepts into production—they know how to overcome the inevitable problems and delays bringing a new airplane into certification and to market. And so they will with the composite Dreamliner Eclipse has no experience; but I have no doubt that they will overcome the challenges before them and finally get the wrinkles with the Eclipse 500 worked out. In other words, they will learn how to do it, just as Boeing did eons ago. Eclipses’ next airplane design will fly effortlessly to market, I predict. This has all caused Ed Iacobucci to delay repeatedly DayJet’s start up by well over a year. Time costs lots of money in the aerospace business and even Ed is not immune. Even now, though DayJet is taking delivery of Eclipse 500’s, the airplane is not fully certified for use to its full capability and therefore Ed’s air taxi service is hamstrung. But, Ed is growing restive. In a recent statement, he shocked industry-watchers saying that DayJet has begun to look at other VLJ manufacturers. Even if the Eclipse were already fully certified, Ed and Vern have by now realized what we and others, who have performed exhaustive due diligence, know—a twin engine jet is great for an entry-level corporate business jet; but a single engine jet is an absolute requirement for air taxi economic feasibility. How do we know? Why, Vern showed up at Oshkosh in his new jet digs—a single engine jet dubbed the Eclipse Concept Jet. Guess it is still a concept to him even though Piper, Cirrus, Diamond, Epic and a host of others consider it a reality.

So, why then, did we decide against the Eclipse 500—since the production problems only recently came to light? The answer is simple: A twin engine jet, even a VLJ, is not the optimal platform for a per-seat, and on-demand air taxi service. It costs more to acquire and operate than a single and with autoland just around the corner for all airplanes, an available ballistic recovery system (BRS)—read “parachute” attached to the airframe and the incredible reliability of modern turbofan engines, a single engine jet is safe, no ifs ands or buts. And it allows us to operate our service at a price point that has the broadest market appeal making refreshingly easy and dignified air taxi transportation affordable to many, many more people than ever before. We will be good stewards of the environment, too since we will burn less, fuel, emit much less carbon dioxide and make less noise. All while getting people safely, affordably and effortlessly to their destinations. Next time, I will wax on about the events of the last month and some of the people who have tirelessly given life to YourJet.

Let’s keep pushing…
Todd House