SurfAir

Like other players in the ‘semi-private jet charter’ space, Santa Monica, CA based SurfAir is a new company, having formed in April 2012. SurfAir currently serves the Santa Monica/Santa Barbara/San Francisco routes, and is clearly targeted at the ‘super commuter’ market–people who routinely shuttle between two locations. They have only about 150 members, and they are currently on a drive to add another 100. They claim to have 5,000 applicants, which really means they have 5,000 leads. I received a phone call from a SurfAir sales rep who said they anticipated selling the 100 new memberships by the middle of the week. With 5,000 leads it seems that they would be able to increase their membership more quickly than that, so this is a bit of a concern about the strength of the market.

Click to Enlarge

Click to Enlarge

However, SurfAir is currently serving a very tiny market–specifically people who commute regularly from LA to San Francisco–and even more specifically, people who are willing to fly from Santa Barbara or Santa Monica to San Carlos, located about 25 miles south of San Francisco and 25 miles north of San Jose. They are clearly struggling with the challenge of maintaining a solid offering of flights while increasing route coverage.

This job is made significantly harder because SurfAir is essentially building a mini airline, meaning they are purchasing aircraft (Pilatus PC-12 )and flying them on regularly scheduled flights. It will be very difficult for them to maintain pace the growth of memberships with the acquisition of aircraft and the opening of routes while maintaining cost-efficiency. If they open a route that doesn’t get adequate membership, they risk having to maintain underutilized aircraft and flying passengers on partially booked planes, which gets very expensive very rapidly. If they attempt to scale back flights in order to improve aircraft utilization, they degrade the convenience factor and risk dissatisfied customers who have been promised regularly scheduled flights.

Click to Enlarge

Click to Enlarge

Pricing

SurfAir’s most significant ‘competitive advantage’ is their all-you-can-eat pricing model. A Founding member can take all the flights they want for a price of $1,350/month.  The standard price will be $1,650.  So if they wanted to fly back and forth from Santa Barbara to San Carlos once per week, that would be eight flights at a cost of less than $170/flight–in the same ballpark as commercial coach pricing. However, if a member only takes one round trip per month, that is a cost of $675 each way. So this is a use-it-or-lose-it model where by the less frequent travelers are subsidizing the travel of the frequent flyers.

Breaking these numbers down to a cost per mile basis in order to compare head to head with SocialAir produces the following results:

surfair_pricing_chart

If SurfAir members fly three to four times a month (i.e. two round trips) on average they will be paying in the same range as Social Air Members. If they fly less than that, then customers are paying significantly more than SocialAir. If they average six or more flights per month, SurfAir risks losing money. Luckily for SurfAir, the three to four flight average is probably right on target, which means that Social Air’s pricing strategy of $2/mile and Under is on target as well.

Articles