By Jeff Mattoon
Ed and Nancy Iacobucci are team players in the aviation business.
As a reminder, this column strives each month to focus on the purchasers of VLJs, not so much the companies that will manufacture them; there’s a lot already written about the manufacturers. We will update you a bit in this series on the creators of the new class of aircraft, but we want to know more about who’s buying. If you or someone you know is standing in line to buy a VLJ—especially if we haven’t profiled the particular jet yet, we’d like to know about it. Check out the contact information at the end of the article; I’d like to hear from you.
If you’re a geek, you may have read Bill Gates’ book, “Business @ the Speed of Thought.” If you’re a super geek, you read it all the way through.
To be precise, “geek” in this instance applies to business and technology equally, and if you’re heavy into aviation business there is a solid chance that you’ve never heard of the book. There are probably two reasons for this: first, it’s by Bill Gates and what does he know about aviation? Enough said. Secondly, we’re talking about the aviation business, and while there are certainly fast aircraft in this business, until recently, the research and development side of things didn’t need to move at the speed of thought. Heck, in years past, forcing aviation business to act at the speed of thought would be like using a bear trap to catch a turtle—it’s just not necessary.
Everything in our world is faster: computers, food service, communications, retrieval of knowledge. Everything except commercial air travel.
For reasons foreseen and unforeseen, the overall time it takes to travel commercially from point A to B has increased. NASA says, “We are a nation that is slowing down, not speeding up, during an age when time is the scarce commodity for us all.”
How to move the masses
You might be thinking that’s precisely why you’re involved in aviation. If you’re a business person, you use your airplane to avoid the commercial airline trap—for you, these concepts do not need explanation. But what about the masses? Not everybody can afford, or has the desire to obtain a pilot’s certificate. When it comes to moving the masses around like you do yourself in your own aircraft, why has no one figured out a way to do it? There’s a real geekish answer to that problem. We know it’s geekish, because it took some real geeks (by actual definition) to solve the problem. Did we say solve the problem? Yep. Hold on.
It’s no secret to avoid long lines at the ticket counter, or avoid lost baggage or avoid required overnight stays; all you have to do is turn to general aviation instead of commercial aviation for the solution.
However, sometimes that instant access to travel can come at a high price. If you want to travel from, say, Jackson, Miss., to Fayetteville, Ark., just call your friendly Part 135 charter operator and buy a flight. If you want to get there fast, an inexpensive jet will cost you around $1,500 per hour. At a distance of 300 miles, this trip will set you back nearly $2,000 round trip, but you will be home for an early dinner. You could, of course, hire an aircraft that’s a little slower and cheaper and still make it home for a late dinner. Going this route will cost you somewhere under $1,000.
If you have the money, no problem, but what if you can barely cost-justify the commercial airline fare, which will be somewhere between $600 to $700 on short notice? What about scheduling? The charter company can get you there, but not until the end of next week—you need to be there on Monday. No simple or cheap answers all the time.
The smart guys
This is where the smart boys have come up with a solution. Meet Ed Iacobucci. For the past four years what Iacobucci, 52, along with his assembled dream team of left-brain thinkers (with a hint of right-brain creativity) has developed will literally revolutionize the way Americans travel. We’ve heard this many times before, but this time it appears real—that is, if everything works as advertised.
Since 2002, DayJet Corporation has operated in stealth as Jetson Systems. The reference to the ’60s cartoon is intentional for obvious reasons.
Before delving into the DayJet system, however, it might be helpful to know a little of Iacobucci’s background. He graduated in the mid-1970s from Georgia Tech with an engineering degree and was soon in the employ of IBM where he gravitated to the newly developed personal computer division.
If you’re over 40, you remember not having a computer in your house—or your office for that matter. Computers were humongous; they filled entire rooms and only certain people in the office had a computer—that is, one that could actually compute. Most “computers” on worker’s desks were actually dumb tubes that glowed green letters and numbers (no pictures), connected to a single mainframe computer, and all peripheral devices, i.e. printers, were connected to the mainframe.
Why were there no computers on every desk? Because in the late seventies hard disk platters were bigger than vinyl records and the whole disk drive unit weighed nearly a hundred pounds—and that was considered somewhat portable.
Then a company named Seagate created a closed hard drive that took up about as much space as four packs of cigarettes, and rapidly everything changed. Eventually, some smart guys questioned what would happen if the dumb tube were replaced by an actual computer with a CPU, a floppy disk drive and a hard drive. This would allow each computer operator the ability to use more sophisticated and complicated software at their desk without bogging down the mainframe.
Soon, the idea of connecting all those smart computers together so files could be transferred through wires, not copied floppies, revolutionized the way business created and shared information. This was the true creation of information technology.
As business devoured this new technology, prices fell and it wasn’t long before the PC found its way into the home and we know where that led; over 80 percent of American households have at least one Internet connection—the ultimate in information exchange short of telepathy.
Big thinkers
Think of the phone. Think of television. It all started with someone asking questions: “What if we could put voices in wires? What if we could send moving pictures through the air? What if we could store millions of pieces of information in a smaller box?
Iacobucci was one of those guys. He, along with a bunch of others asked those questions at IBM and eventually they joined forces with some guys at a tiny software company called Microsoft and co-developed a new operating system. We all know how things turned out for both companies.
Iacobucci left IBM to start a software company called Citrix, which took advantage of the emerging technologies and took off like a rocket. Thirteen years and an IPO later he left the company to retire, or so he thought.
“I was gone for about four or six months…and I didn’t like not having the excitement of growing and developing markets and new businesses, so I started to look at opportunities,” says Iacobucci.
Prior to leaving Citrix, Iacobucci and his wife Nancy traveled so much they decided to buy a Lear 60 and as he characterizes, became addicted to aviation.
“I also became addicted to shaping travel around my schedule, not my schedule around my travel,” he adds.
It didn’t take Iacobucci long to figure out that if he could benefit from such on-demand travel, there were others who would too. The entrepreneurial and aviation bug collided with the creation of Wingfoot Services, a mid- to long-range jet charter company catering to individuals and subcontracting to other charter services. In addition to the Lear, they added other jets to the stable and became a well-respected executive jet service company.
Nancy became Wingfoot’s president and CEO, which left Ed to bounce around to executive technology conferences to reconnect. One connection might prove to offer big payday number two for Iacobucci.
In 2001, Iacobucci listened as an old technology friend and compadre Vern Raburn gave an impassioned talk on the future of aviation.
Iacobucci didn’t agree with Raburn
While the discussion of a new breed of jet aircraft was convincing, Iacobucci didn’t agree with everything he heard from Raburn.
“It was evident to me that my neighbors and friends weren’t going to run out and buy a million-dollar aircraft, then have to spend half their lives getting certified and then maintain currency in an IFR-rated, twin-turbine jet with all the latest and greatest capability,” he said. “(I felt) it would take someone who had dedicated their lives to the profession of piloting to utilize that system properly.”
While Iacobucci didn’t believe there would be a chicken in every pot and an Eclipse in every driveway, he did begin to formulate the kernel of a potent idea. After spending a day with Raburn discussing aviation, Iacobucci went back to his home in Florida and dug though all the business models he and Nancy explored when creating Wingfoot, and a very powerful thought emerged.
“I came to the conclusion that there are some very interesting things that happen when you start replacing one $24 million piece of equipment with 20 $1.1 million pieces of equipment,” he said. “Apart from the obvious, from a service point of view you can reach markets that were unreachable and provide an entirely new platform and entirely new view.”
The Iacobuccis dropped $2 million of their own money in a new project called Jetson Systems Corporation, and to date have solicited some $30 million from private investors to launch what is now known as DayJet Corporation. This all sounds very traditional as it relates to aviation. Entrepreneur buys a bunch of airplanes and sells time in them to customers—no big deal. But wait, the plot seriously thickens.
Instead of a dozen or two aircraft, what if you bought more than 200? Iacobucci and his team believe that scale is part of the key. Growing to scale is fraught, however, with many difficulties. Instead of a Part 135 large business jet charter operation, you’d start to look more like a small Part 121 airline. Operating as an airline, however, has intrinsic problems that Iacobucci was determined to avoid, particularly the hub and spoke model.
Toss it out and start from scratch
Actually, what Iacobucci wanted to avoid was all traditional models and completely invent a new strategy—sounds right up an IT guy’s alley.
To accomplish this daunting task, Iacobucci assembled a staff that includes complexity scientists, sophisticated mathematicians and statisticians, a demographer, a cartographer, aviation flight operations regulations people, market planners and market segmentation specialists.
The problem with traditional air-taxi service, from Iacobucci’s perspective, was lack of opportunity. He cites the Department of Transportation study that reveals 90 percent of all air-taxi operators generate less than $5 million per year and more than 65 percent generate less than $1 million per year. The numbers aren’t too compelling when launching a new air-taxi service.
Fractionals aren’t that much better, according to Iacobucci, because of the clientele you’re catering to and all the expenses that go along with them.
“If you look at a $25 million Challenger, inevitably I don’t think you’d find anyone fractionalizing it for less than $4,000 to 5,000 per hour. That cost immediately segments the market into a small group of people who can afford that,” says Iacobucci. “Richard (Santulli) of NetJets once told me, ‘I have owners who will not fly with a blonde pilot, owners who won’t fly if the tail numbers add up to 13, owners who won’t fly if there are black jelly beans in the back.'”
Iacobucci observes that when you take all those individual requests into account, one very important ingredient is removed and that’s interchangeability—resultantly growing to scale is very difficult, if not impossible, and that drives costs up even further.
Another vital component to a state-of-the-art transportation system, according to Iacobucci, is automation. When the DayJet team looked around for examples of state-of-the-art scheduling methods, they couldn’t find any.
Analyzing the fractionals, Iacobucci said, “They have a lot of automation to show you what has been done historically, or where clients currently are, but when it came to deciding where the aircraft needed to go, it was all manual; it looked like the Chicago Board of Trade—really.”
Complex problems require complexity scientists
In their research, the DayJet complexity scientists concluded that type of scheduling eventually deteriorates into chaos at a certain size. That’s why within fractionals they dispatch in pools of usually around a hundred aircraft; anything larger, says Iacobucci, and you get diminishing returns.
Iacobucci laid down the gauntlet to his team. The “Golden Ring” would be point-to-point, on-demand transportation between secondary markets at commercially viable fares. That may not sound as big a deal as it really is, but when you analyze the program, it’s a tremendously big deal.
When you want to book a flight through DayJet, you go to their site on the Internet and type in the zip code of the city of origin, the zip code of your destination, the date and time you want leave and the time you wish to arrive at the destination. Within five seconds the system, which is currently nicknamed Astro, will let you know if it can fulfill your request. If it cannot, you simply alter your demands and try again, but according to Iacobucci, that’s not likely. The system, run by a 40-processor supercomputer, has run in a virtual mode with 300 aircraft for over a year now and the maximum time it takes to validate a request is five seconds.
It’s essentially the same as a 135 service, but as Iacobucci adds, there’s one final piece of information they ask for.
“We ask ‘How flexible are you? How early are you willing to leave?’ The greater the flexibility the lower the cost,” he said.
There’s a stipulation, however. The passenger must be willing to make at least one stop, with no plane change, to pick up or drop off another passenger or to refuel.
As soon as Astro firms up the flight plans and files with the FAA, the schedule is frozen and no more passengers are added. This keeps them far from Part 121 with all its expensive regulations and squarely into Part 135.
What is true on-demand service?
L to R: Ed Iacobucci and Eclipse’s Vern Raburn sealed the deal for 239 Eclipse 500s.
Many Part 135 operators would suggest their service is “on-demand,” but Iacobucci, as a result of his research, would differ with that. He’s thoroughly convinced that the DayJet system will be the first in the world to offer true on-demand air transportation service with so many available aircraft.
That takes care of the availability, but what about cost? The DayJet program’s target pricing is a 25 to 75 percent premium above commercial fares—just as if there were commercial hub service in that particular secondary city.
According to Iacobucci, this pricing is right in line and almost break even for about one and a half percent of travelers who are required to stay overnight if flying, or for the ones who must drive. That’s plenty of people to create a handsome market for DayJet.
“We’ve done 20 focus groups in nine cities with 130 participants, 70 key decision makers, and the same message comes through: the biggest productivity gain is to be able to, on an as needed basis, go out and come back on the same day.,” he said. “That’s an incredible, tangible productivity boost they’re willing to pay money for.”
Obviously, Iacobucci isn’t the only person thinking this. In a previous Journal VLJ article, Steve Holtje of Falcon Enterprises of Pinellas Park, Fla., indicated that the use of “on-demand” air travel allowed the company to avoid the expense of adding additional employees to cover employees who had to travel. The swift travel allows the key employees to participate in client meetings on location and be available for important work at home.
When you begin to consider accounting from that perspective, the DayJet market might be much higher than one and a half percent.
Another critical component to the DayJet system is controlled growth. The service will launch regionally in carefully selected cities where Part 121 service isn’t offered.
“The whole system is based on managing the growth in these cities so we can match customer experience and not have ridiculous reject rates. (We’ll do this) by tying together our market simulators with our service simulators and carefully plan how we grow,” says Iacobucci.
DayJet plans to create a presence in each of its service cities by utilizing the fixed base operation. It will resemble a rental car stand where each is staffed with local planes and local pilots.
A refreshing attitude
Iacobucci and his staff have done their homework and then some. They’ve met with DOT, FAA, NASA and the TSA—and offer what appears to be a refreshing attitude.
“We didn’t go to the FAA saying ‘If you could only change this rule, we’d offer this great service.’ We went to them saying ‘We love your 135 rules, we’ve studied them, we understand them, and we just want to make sure that you agree that what we’re doing here abides by your rules,'” glows Iacobucci.
He adds that he really looks to all those agencies as partners in building a never-before-tried way of conducting transportation.
Another huge partner with DayJet is Eclipse Aviation. Iacobucci and Eclipse jointly announced, as reported here in April, DayJet’s firm order of 239 Eclipse 500s with options for an additional 70.
Iacobucci also indicated to Airport Journals that the agreement was non-exclusive with Eclipse and that he’s talked with “all” VLJ manufacturers and expects to utilize “other form-factor” aircraft as the company expands. He was quick to point out that there’s a lot of science that goes into utilizing other aircraft—ostensibly because other aircraft will offer varied capabilities and all of that will need to be programmed into Astro. As Iacobucci puts it, “It makes a complicated real-time automated dispatch system even more complicated.”
In the business of aviation, and in particular, the VLJ business, there’s much speculation. Are Ed Iacobucci and all the folks at the DayJet Corporation involved in one big blue-sky speculation? Because in order for their dream system to work, they need a lot of small jets, and right now there are only three companies that appear able to fulfill that demand. That question may have been valid a year ago—but not really any longer. The three companies that are furthest along in the certification process are well along, and it appears that 2006 will be the magic VLJ year.
The times are truly exciting. Witnessing computer geeks and aviation fanatics coming together to create a new industry is exhilarating. Maybe the new breed should be called AvGeeks.
Speaking of geeks, has anyone seen that Bill Gates book? It’s time to get reading.
For more information on DayJet Corporation, visit [http://www.dayjet.com]. Jeff Mattoon can be contacted at jeff.mattoon@airportjournals.com.