British entrepreneur and Virgin Group founder Richard Branson once famously quipped, “If you want to be a millionaire, start with a billion dollars and launch a new airline.” Despite the challenges, startups keep trying to make air travel better, especially for business.
Surf Air
A new airline, Surf Air, offers “all you can fly” subscriptions for under $2,000 per month, rather than charging by the trip. Surf Air plans to focus on short-haul flights that connect business hubs in the U.S.
According to its founder and chief executive, Wade Eyerly, Surf Air just attained the last of the approvals it required from the Federal Aviation Administration to begin flying its first route between Burbank, Calif., and San Carlos, Calif. – linking Hollywood and Silicon Valley, starting June 12.
It also attained $7 million in Series B funding in a round led by Base Ventures and Velos Partners, joined by its earlier backers, New Enterprise Associates and Anthem Venture Partners. The company has raised a total of $11 million in venture capital to date.
Since the planes that Surf Air operates are small Pilatus PC-12′s with six to eight seats, there will be no attendants on board its flights. Instead, the startup will provide a high-end concierge service at the gate, meeting passengers’ pre- and post-flight needs.
Startup airlines are rare in the U.S., however.
A principal analyst with travel-research firm, PhoCusWright, Douglas Quinby explained why: “Starting an airline is extremely capital intensive, high risk and low reward. For every JetBlue, there are many, many more that have failed,” he said.
Except for Southwest Airlines, most major carriers in the U.S. have been through bankruptcy, enabling legacy airlines to offload debt, redo labor contracts and restructure their businesses into lower-cost models. “They have so much scale now, it will be a lot harder for new entrants to make it,” Quinby said.
One Surf Air investor, Erik Moore, founder and managing director of Base Ventures, admitted the airline business is highly risky, but “you gotta make some big bets.” Moore is also an investor in BlackJet, a service that he views as complementary, not competitive with Surf Air.
Instead of owning and operating aircraft, and hiring its own pilots, BlackJet books its members in unused seats on private planes in its network, flying over select routes.
Eyerly explained, “We’re a capacity flyer. They’re an elegant broker solution. Just like Uber Technologies, BlackJet is looking at what they see as excess capacity in the marketplace, and making use of it. We’re adding new capacity, and flying planes themselves.”
Because of the intimidating amounts of overhead and regulatory challenges involved in starting an airline, most startups focus, instead, on helping business travelers attain ideal or ideally priced hotel rooms (Room 77, Hotel Tonight), flights (Flightfox, Evature), ground transportation (Hailo, Embark) and other services wherever they go.
Surf Air will compete with traditional airlines, small private jet businesses and upstarts like Arrow, also a membership-based flight service, which focuses on the Seattle to San Francisco route.
http://blogs.wsj.com/venturecapital/2013/06/03/cleared-for-takeoff-surf-air-scores-faa-approvals-more-funding/