<B> A New Pro Air?</B>
<I>Startup Attempts To Fill Plane W/ Corporate Guarantees</I>
By Jay Campbell
<I>Rochelle Park, N.J.</I> - Playing a twist on the Pro Air model, a start-up company is seeking contractual support from corporations to share seats on its all-business-class daily roundtrips between New York and London, planned for the first quarter of next year.
Called Equitair, the three-partner company is close to sealing commitments from two major New York financial institutions to each buy about five of 64 seats flying every business day on a leased B757-200 ER aircraft operated by North American Airlines. The contracts, which also are circulating at two other New York financial firms, are for five-year terms and do not require up-front capital investments.
Fares would be $1,871 per roundtrip paid on a monthly, company-wide direct basis or $1,950 when paid individually through corporate cards. That rate compares favorably with business class roundtrips quoted in the marketplace last week at more than $4,000. Taking into account average negotiated discounts, a conservative estimate pegs the savings at more than $1 million a year for companies buying five seats a day on each of 250 annual flights. The aircraft will operate Sunday through Thursday departures and Monday through Friday returns.
John Heilner, Princeton, N.J.-based consultant with Management Alternatives, said some companies can negotiate full-coach fares on business class service, but even in that case, Equitair's fare beats the best the GDSs offered last week by a couple hundred dollars. "The price is certainly attractive," said Heilner. "A five-year commitment is a long time, though. With the pace at which things change, that's an eternity. Plus, committing to a certain number of seats is never pleasant--there can be a lot of cancellations."
One travel manager approached by Equitair who declined the offer said five years "is a longer commitment than I'd like to have. But I like to see that kind of thing. It takes away a bit from the airlines' arrogance. I hope they succeed."
Jim Lennon, global travel leader at PricewaterhouseCoopers, said he, too, was approached, but, "At times we've had trouble meeting such commitments with hotel rooms, so I'd be hesitant to do this."
Paul Bultmeyer, Equitair's executive vice president and main salesman, argued that it is the very nature of the long-term contracts and the way in which bookings on Equitair are hidden from incumbent majors that make it an attractive investment.
Bultmeyer also is in discussions with Carlson Wagonlit Travel and other agencies to become risk-free reseller outlets for seats that companies do not use, part of Equitair's re-marketing program. The seats would be sold to the agency, which then would be free to mark up the price as it wishes. Corporate customers also may sell and trade seats with one another; seats that go unsold would be billed to a phantom card or department.
"We're probably in the range of 20 to 24 seats committed now," said Bultmeyer. "With 20 more moving along, we're looking to get a total of 12 to 15 firms." The long-term contracts, he said, guarantee the fare--which breaks down into $796 in fixed costs including management fees, leasing costs and the plane's initial refurbishment; and $1,075 in variable costs for fuel, crews and maintenance.
Meanwhile, he said, clients do not risk angering their existing airline suppliers because the bookings would not appear in GDS reports. Equitair will be booked on the Internet using a new res system by Saturn Internet Reservations Systems Inc., a Holmdel, N.J., company that is about to release a new system linking black car reservations with the GDSs (<I>BTN,</I> May 31). The system, in test at Andersen Consulting, will enable Equitair customers to book town cars on the same transaction as the air booking.
"A res system is a res system," said Saturn president Greg Tuccillo. "The only difference between aircraft and limos is the number of seats."
After Equitair started out last summer by marketing to corporate fleet departments, Bultmeyer and his partners--Dan Thompson of Dan Thompson Industrial Design, which designed the interior for the Boeing Business Jet, and Joseph Carfanga, president of corporate aircraft broker Wings Aviation International--realized their market is in corporate travel management since the capital-investment mindset of corporate aviation operations typically address high-end travelers. "We found travel managers are used to dealing with the traveler from the next level down," said Bultmeyer.
In late February, the company started contacting travel managers and has adjusted its model based on their input. Originally, for example, there was no allowance for corporate card usage until travel managers explained the need to charge back costs to the appropriate business units.
One major potential customer may convince Equitair to move its London base from Luton Airport to the slightly closer-in Stansted Airport. On this side of the water, flights will depart and arrive at North American Airlines' space in JFK's Terminal Four, now under renovation. One drawback to the London side, buyers said, is that it won't be easy to hop on another flight if there is a delay. But, Bultmeyer countered, NAA has the highest level of dispatch reliability of all B757 operators. NAA serves as a feeder carrier to El Al, which also gives it superior security.
Not only do travelers never have to check bags because of extra carry-on space, but they also enjoy 55 inches of pitch, laptop power connections at each seat, satellite telephone and modem communications and fax, copy and printer machines.
Equitair also offers no ticketing, expedited passport and customs checks, and an onboard lounge with concierge service and a trained paramedic.
Bultmeyer has made the most progress with New York financial firms, but some hadn't yet heard from him. "I'd love to see their proposal," said James Merlino, vice president of procurement and corporate managed services at Chase Manhattan.