Will Execs Hail Air Cabs?
When airline visionary Donald Burr started People Express in 1980, he brought ridiculously low fares and unparalleled employee involvement to an industry that badly needed both. Unfortunately, Burr's innovations were ultimately swept away by mismanagement, overexpansion, and new forms of attack by the giant traditional carriers.
Now, the 62-year-old Burr is back with an idea that he hopes will have more staying power: tiny jets that will shuttle executives on demand to small airports. The name: iFly Air Taxi. To bolster his credibility, he has signed on one-time rival Robert Crandall, the hard-nosed former CEO of American Airlines (AMR ), who retired in 1998.
As an investor and company chairman, Crandall -- who declines to disclose the size of his investment -- says he'll mainly act as a consultant to the venture. But he says he got involved "because I think there's a big market for convenient, low-priced, limo-equivalent air transportation." That has been fueled in part by security delays and reduced flights on some routes, as the major airlines have struggled to cut costs and respond to the threat of terrorism.
TOO NEW TO FLY.
Burr has also attracted former hedge-fund manager Julian Robertson, who, along with some associates, has ponied up $4 million. All in all, Burr has raised $6.3 million in convertible stock sales, according to a Mar. 29 filing with the Securities & Exchange Commission.
Burr's iFly isn't aiming at the masses but at high-paying business travelers who want to get somewhere fast and hassle-free. While a growing number of these travelers are now using private jets or buying part ownership of such aircraft, Burr figures he can offer a cheaper service with a new generation of four- and five-passenger planes.
The planes are expected to cost about $1 million apiece, or less than half the price of current alternatives. They're so new that they have yet to be certified to fly by the Federal Aviation Administration. And as of yet, Burr hasn't placed any orders with manufacturers such as Eclipse, Adam Aircraft, or Honda (HMC ) to produce the planes.
Still, Burr aims to start his service next year with about 25 planes in the Northeast. "Our intent here is to bring the private-travel market down from CEO level to manager-level people," says Burr. He figures some 700 small airports in the region are ripe for his air-taxi service.
Some analysts question the economics of the fledgling venture. Aviation analyst Richard Aboulafia at Teal Group sees "serious problems" with the concept. Most important, it needs a "critical mass" of planes to be successful so it can readily serve the less-developed markets where such a service would be attractive, says Aboulafia. But that means a hefty capital investment and a lot of risk. "Why not at least prove the concept" with older, used planes that would be relatively cheap to acquire, he wonders.
Burr isn't deterred by the pessimism. Before working on iFly, he was most recently CEO of a company that created airline manpower scheduling systems. It was sold three years ago to Boeing (BA ). Burr doesn't expect his newest brainchild to create any real turbulence for the established airlines, even though it might be picking off some of their best business passengers. "You're dealing with such a small number of seats," he says.
Still as the airlines continue to scramble for profitability, every passenger counts. And with the fiercely competitive Crandall on board, Burr's company is bound to pop up on a lot of airline radar screens.
By Wendy Zellner in Dallas
Edited by Beth Belton