UK air-taxi service ready for ‘the VLJ revolution’

 - May 17, 2008, 11:50 PM

Blink has set the bar pretty high for itself in pledging to radically overhaul the business model for air taxi services in Europe with a fleet of Cessna Citation Mustang very light jets (VLJs). Its goal is little short of achieving the Holy Grail for the executive charter market: drastically reducing empty leg positioning flights. This way it intends to offer prices that will range between 25 percent below and 25 percent above the combined business-class scheduled airline tickets for four passengers.

The UK based group has just taken delivery of the first of 45 Mustangs that it has on firm order and it expects to begin revenue flights as soon as next week. Blink is due to receive the remaining Mustangs at a rate of one per month over the next two-and-a-half years.

The British-registered jets are to be flown under the aircraft operating certificate of TAG, which will also provide pilots initially. Blink has been recruiting its own experienced operations managers, mainly from airline backgrounds, such as British Airways.

Company founders Peter Leiman and Cameron Ogden conceived the Blink business plan in late 2005 while they were MBA students at Harvard Business School.  They identified VLJs as a potent disruptive technology for the air transport market. “We went to [retail giant] Walmart, which then had 28 of its own aircraft, and we demonstrated that it could save 25 percent on its travel budget with VLJs,” explained Leiman, who is Blink’s managing director. “We showed them that on less than $50,000 per year VLJs could be valid [as a mean of transportation] for employees.”

The Walmart case study prompted the Blink founders to seek an opportunity for using VLJs to establish regional networks tailored specifically around customers’ core travel needs. According to Leiman, existing charter operations are chronically inefficient and represent poor asset use because of excessive repositioning of aircraft that are largely flying one-way trips. Citing figures from Eurocontrol and the European Business Aviation Association, Leiman said the average business jet load factor is just 2.3 passengers. On that basis, he maintains that most European charter customers are flying in aircraft that are too large and costly for their needs.

“Our price point is half the cost of today’s charter market and we will be competitive with British Airways Club [business class] on short-haul European flights,” Leiman told EBACE Convention News. “We are using the same principles as low-cost airlines, with high asset utilization and minimal deadhead trips by flying only within networks. The VLJ revolution has arrived.”

The business plan was convincing enough for Blink’s financial backers, who last year raised $30 million to fund the start-up. The challenge now is whether the model will work in practice and whether it can weather the widely anticipated downturn in charter demand caused by the crisis in financial markets.

In establishing its customer base, Blink mainly has been approaching major corporations who have a need to move employees among facilities around Europe that are not well served by scheduled airline flights. For example, one prospect from the information technology sector routinely flies managers from its headquarters in southern England to meetings at offices in southern France and Ireland. Neither location allows nonstop airline service from the London area, so staff are obliged to travel the day before each meeting and return the day after, expending the best part of half a working week for the sake of one meeting.

Research by EBACE Convention News showed the total cost of four business-class airline tickets to and from the French location to be £1,504 ($2,947) and for the Irish location the total was approximately £1,354 ($2,654). Assuming total round-trip flight time of approximately four hours for the French location and three hours for the Irish location, Blink’s target flight hour price might be projected somewhere between £300 ($588) and £600 ($1,176).

Blink has not disclosed details of its pricing, arguing that it is subject to how individual customer networks are drawn up and negotiated. However, these flight-hour price projections would make Blink’s rates significantly less than half of those quoted by other Citation Mustang operators in Europe.

Eventually, Blink expects to fly to up to 100 destinations in Europe. “Once the network is built we can open it up to more random journeys for which there will just be one-way pricing,” said Leiman.

But, at least in the start-up phase, Blink makes no pretense that it is offering fully flexible ad hoc charter as this is commonly understood. Clients will essentially build their own schedules, by defining set destinations and departure times. There will be limited freedom to make changes, for instance, if a meeting is running late (although an as-yet-unspecified buffer time for late departures will be built into agreements). Indeed the degree of flexibility permitted will be directly factored into the price customers pay.

“We can’t be everything to everyone at this price point,” conceded Leiman. He expects many of Blink’s early customers to commit to what are essentially corporate shuttle services. All flights will be booked via the company’s Web site.

In its effort to reduce deadhead flights, Blink’s operations team will divide Europe into subregions: for example, England, northern France and Benelux, western Germany, Switzerland and southern France. Within each subregion there will be so-called “A bases” and “B bases,” which Leiman compared to taxi ranks. A bases will have some infrastructure (such as an office for pilots and line maintenance capability), but B bases will have none. In theory, only revenue flights would be made between these subregions, and deadhead sectors would be limited to no more than 30 minutes.
Initial Blink operations will start with a select group of launch customers. By the middle to second half of 2009, the company aims to have enough aircraft to achieve its declared “minimum efficiency scale.”

Speaking before EBACE, Blink would not say how many customers it has. “We have had discussions with 10 to 20 companies and we have several people who are ready to sign up. We are trying to decide which customers to start services with,” concluded Leiman. “Our value proposition is allowing customers to get more out of their employees, delivering real value for money.”