The PAX story began when the FAA considered new rules for charter operators in the early 2000s. A proposal was made to allow charter operators to negotiate with passengers on a per-seat basis. The intent was to add air service to communities that did not have airline service. Bruce Sawhill Ph.D, co-founder of PAX, was a co-founder of DayJet. DayJet was the first air-taxi service to deliver a per-seat, on-demand travel service, all online. DayJet operated with the Eclipse 500 Jet for about a year, flying over 6,000 flights, unfortunately when they needed another funding raise, the financial markets were melting down in mid-2008. But the experience proved invaluable. Mike Azzarello, founder of PAX, and Bruce did in-depth research to understand what was successful and what failed. They search for solutions, inside and outside the aviation industry. The result is WingTips™, a PAX technology stack that is the operating system for per-seat, on-demand air service. Emulating the success of Crowd Economy companies, PAX is the platform that links aircraft (owners or operators) to passengers. PAX solves the logistics problem of aircraft movement. The sections below provide details about PAX and the per-seat, on-demand market. Leave a comment or contact us directly info@PersonalAirlineExchange.com.
- Airlines vs Charter
- Private Charter vs PAX JetSeat
- Time is money
- Cost and Value
- Long Tail Routes
- Crowd Scheduling(tm)
- My Plans Have Changed
- Deregulation & Re-regulation
Aviation is a highly regulated industry. Airlines offer scheduled flights between predetermined airports. As the buyer, you search for flights, see a display of options and pricing, your only negotiating choice is to buy or not to buy. Charter is an on-demand service, you as the buyer make a flight request setting the date, departure time and airports. The operator confirms if an aircraft is available, and then both sides negotiate details to refine the trip and reach a final negotiated price. Airlines are inexpensive travel, and faster than alternatives when the passenger’s origin and destination are close to the airports they use. Airlines start to ‘slow down’ when you need to travel longer distances to get to and from an airport.
Airlines further slow down if you make a connection. From experience at DayJet and our own analysis, PAX flights are the best option for shorter flights, i.e. under 400 miles, using smaller airports that have limited or no airline service. DayJet found through customer interviews that the competition was not the airlines but driving; the effective travel time for airlines versus driving was about the same. DayJet dramatically accelerated door-to-door travel speed for these trips, from under 70 mph to over 200 mph. The large time savings justified the premium for per-seat charter.
Airlines have successfully driven the price of air travel down so that it is available to a large segment of the population.
More on Airlines and Charter
The first fixed wing airline flew on January 1, 1914, over 100 years ago! Today airlines fly 700 million passengers trips a year for domestic travel. As travelers, we have learned how to seek out the flights that will meet our needs. But in this negotiation, our only leverage in the transaction is to decide to buy or not buy, no opportunity to influence airports or schedules. The airline business model depends upon flying full flights, to achieve this, airlines adjust fares, routes, and schedules to increase occupancy and revenue. Being a competitive market, airlines ability to move pricing is limited. So alternative methods are used, for example when jet fuel prices increase, the airlines reduce the number of flights on routes, leading to higher occupancy and revenue. Airlines have decades of historical flight data, and operate on the hub & spoke model, which results in the concentration of flights between a small number of airports – a report showed that about 80% of airline traffic is between 38 airports. For longer trips, over 500 miles, airlines have a speed advantage compared to driving. For trips under 500 miles, and that require the traveler to use airports less convenient for their origin and destination, airline effective speed drops rapidly, to the point that driving becomes a reasonable alternative at lower cost. On-demand charter flights using business aircraft is the opposite of airlines. First, a customer makes a request to a charter operator for a flight. The user provides the date, departure time, departure airport and arrival airport. The charter operator responds with availability of aircraft for the flight. And then the operator provides pricing. Pricing for charter is very expensive compared to airlines, since a traveler is reserving an entire aircraft, hence the phrase “private aviation”. A light jet costs about $12 per mile, airlines regularly are under $1 per mile, and driving is about $0.80 per mile. A negotiation starts between the customer and charter operator, where the user seeks to achieve their flight objective, while getting a cost savings. The operator, knowing the user is likely getting competitive quotes, seeks to meet the user’s request, at a good sales price, and close the deal. Private aviation has the advantage over airlines in that each trip is unique, and most airports in the US are available, over 5,000 can be used by business jets. In a survey done of a major jet card company, the top reasons for using private aviation is to save time and use airports the airlines don’t serve. These two items are related, more on this later.
The Personal Airline created JetSeat™, a service to give you the power to request an on-demand flight, like a private charter, but then share it with other passengers. The system performs a virtual negotiation among a group of buyers and multiple operators, making the process fast and easy for all parties. A JetSeat flight is four times (4x) faster than driving or airlines on the target routes (under 400 miles) and using airports without airline service. And JetSeat is up to ten times less expensive than a private charter flight, bringing the cost per mile of JetSeat close to airline fares.
JetSeat™ is a disruptive technology. JetSeat creates a new category of air travel, providing most of the benefits of a charter flight, but at reasonable fares. For charter operators, who source the flights to PAX, JetSeat attracts a new segment of buyer, growing the market 2.5X bigger than its current size. JetSeat is the next wave of technical innovation driving the Crowd Economy.
The best parts of charter remain for JetSeat: airport selection, control over dates and times. What is different from private charter is flight flexibility by the user. A private charter user can make limited adjustments to the schedule while the trip is underway. For example, if the aircraft is waiting at the airport for the return leg, it is possible to request to leave early. A shared flight using JetSeat can’t do this since multiple parties are involved. However, the market for JetSeat exists, Bruce Sawhill proved this at DayJet. Customer surveys by DayJet found that 98% of customers had never flown private aviation prior to DayJet. Mike Azzarello found similar results with JetLimo and from the contract with JetSuite for the SuiteShare and SuiteDeal services. The demand for a new travel mode exists, getting it to work at scale and efficiently for all parties has been the inhibitor… until now!
Google “time management” and it returns 2 billion hits! Time is the unsustainable resource everyone must deal with. No matter what we do, time is being used up. Making better use of time impacts our quality of life. JetSeat is your Time Machine! With JetSeat, your travel time can be four times faster than driving or flying. An sample trip, Santa Barbara California to San Diego, is either driving the entire day, since there is no direct airline service, or JetSeat at about an hour each way door to door.
First year Economics students learn that the value of something is whatever someone else is willing to pay. We highlighted the large price delta between airlines and driving, and private charter. JetSeat brings the benefits of on-demand jet charter with a price point that expands the market exponentially. When selling private charter, there are two fundamental qualifying questions: can you afford it? and are you willing to pay for it? The second question is the more difficult one, many people in the “able to pay” group are simply not “willing to pay”, even with the time savings. JetSeat converts these travelers to JetSeat fliers.
PAX is a two-sided market for on-demand charter. Both buyers and sellers benefit from PAX. Some of our innovation, e.g. advanced economic auction strategies, increase the effectiveness of charter sales across the entire charter market, not limited to per-seat flights. Charter is decentralized, so little flight optimization occurs. As a clearing house, with embedded flight optimization algorithms, PAX drives optimization through the market and down to individual operators. The Marketplace addresses the high cancellation fees that are standard today in charter. And PAX will be a driver for market consolidation. A Harvard Business Review study of Industry Consolidation identified four stages of consolidation. The launch point is industry formation or deregulation. The charter industry is highly regulated, a Marketplace provides transparency, and a layer of abstraction to allow consolidation to occur. The introduction of PAX and the increased demand of JetSeat, plus optimization for PAX partners, provides a competitive advantage to these participants, helping to drive consolidation.
Airlines concentrate their traffic to a few cities and routes. This leads to higher occupancy rates for each flight, but leads to connections for many trips, dramatically dropping the “travel speed” of airlines. Charter flights use the airports most convenient for both origin and destination. The combination of less time pre-boarding (minutes compared to hours for airlines), and the use of closer airports, results in charter flights effective travel speeds, measured door to door, of over 200 mph.
JetSeat flights have their best value on short trips and between airports with no airline service. These routes lack the volume an airline needs to support scheduled service. JetSeat service works with 6 passengers per flight. An interesting part of this graph is that the “long tail” section of the graph has a greater number of overall trips than the airline section, but spread across 1,000s of routes. For these trips, people often drive, or fly to an airline airport and then drive a long distance to the actual destination, often with an overnight stay in a hotel. The name DayJet, Bruce’s company, was meant to invoke the concept that long trips not served by airlines could be a day trip using DayJet’s air taxi service.
PAX created algorithms that combine user requests for flights, integrating Bruce’s logistics and optimization expertise, to make JetSeat flights occur often. This is the secret sauce to per-seat, on-demand flights. Crowd Scheduling is the effect we generate with our technology, allowing users to create flight schedules dynamically. A Crowd Economy focused solution.
The charter industry has some of the worst cancellation policies. Fees of 100% are common for flights cancelled within 1-3 days of travel. PAX leveraged WingTips technology to build a comprehensive Change Management system that operates more like the airlines.
If it were easy, everyone would do it… The idea of per seat, on-demand charter (JetSeat) has been attempted before. The obstacles are significant, but not impossible. The PAX team has the benefit of prior experience, along with taking a unique approach to defining the obstacles and the solutions.
The aviation industry is one of the most heavily regulated. As touched on in Marketplace section. It is not likely that it will become “deregulated”, but there are signs that the FAA will need to respond more quickly to changes in technology. The advances in drone/UAV vehicles is a recent example. The forthcoming electric Vertical Takeoff and Landing (eVTOL) is another example of a new aircraft type that will have broad application, and need to fit into the current regulations quickly. In the meantime, PAX addresses the demand management elements for buyers, and sales strategies for operators, to bring improvements to the FAA Part 135 charter industry. This has the benefit of allowing operators to focus on operating flights, and less on marketing and selling expenses.
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