INSIDE AIR TRAVEL
Crandall: says Very Light Jet air charters 'irrelevant' to airlines.Former American Airlines Chairman and CEO Robert Crandall said that Pogo, the air taxi business he is launching built around very light jets (VLJ), will begin offering on-demand flights out of small airports in the US Northeast in 2008.
In a conference call, last December, produced by Merrill Lynch, Crandall assured analysts that the VLJ's impact on airlines would be "irrelevant" but that the industry's current rush to consolidation might drive customers toward charter and air taxis. "The impact of companies like Pogo on the airlines is irrelevant. Even if we succeed five times as well as we hope to succeed, we won't move enough passengers for the airlines to notice," Crandall said.
Pogo is hoping to lure high-income passengers who require point-to-point charter service. He said the company's branding and accessibility will make it easier for customers to access such a service, which will be available starting in 2008 on flights of up to 1,000 mi. throughout the Northeast, with expansion possible later on.
Another company, DayJet, is developing a similar plan targeting the southeast US, beginning in Florida, connecting small communities that lack nonstop scheduled air service. several other VLJ air taxis are also starting in Europe.
Pogo expects a net loss of $7.2 million on revenues of $3.2 million in 2008 and expects to turn its first profit in 2010. By 2012 it should be earning $29.7 million on revenues of $203.3 million.
Rather than focusing on a perceived threat from VLJs, Crandall said airlines should consider the effect that further mergers and consolidation may have on competition and customer behavior. "The underlying rationale [for consolidation] is the elimination of competition. There are not big cross-synergies associated with trapping two airlines together," he said. "The only way the airlines are going to get their pricing up to the point where they can make a satisfying return [is by making] the system even less convenient than it is today...If it makes the system even less accessible and more expensive, it will further heighten the appeal of private aviation."
Regarding air traffic congestion, he said stakeholders already have acknowledged that a new system is required and Pogo's reliance on much smaller airports will not burden network carriers.
Dec. 19
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