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Valuable NYT story on air taxis
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Today's NYT story on DayJet and other new air taxi companies makes the important point that what has slowed them at the moment is not (necessarily) a flaw in their own business model but the general collapse of the U.S. credit market. Joe Sharkey of the NYT says of Ed Iacobucci, CEO of DayJet:
In case it's not obvious, companies like DayJet need to expand to succeed because of the same network-efficiencies principles that determine the value of cell phone systems, social-networking sites, companies like FedEx and eBay, and modern networks in general. The more people who are already connected, the more attractive it becomes for each new member to join. Thus the familiar Metcalfe's Law, from Bob Metcalfe: the value of a network is proportional to the square of the users it connects.
For an air taxi company, this means: the more cities it can fly to (that is, the more "nodes" in its nework), the more attractive it becomes to new customers and the more efficiently it runs (because fewer wasted return trips and "deadheads.") That is why the DayJet plan called for adding new cities every month. And this is why, according to the DayJet officials and others, their business plan would have supported continued expansion through this year and beyond -- in "normal" credit circumstances. Their plans had allowed for oil at well over $100 a barrel -- but not for an inability to get working capital at all.
Where, when, and whether small-jet taxi services will become successful is impossible to say. But it's worth noting, as this Times story does, that the impediment to date has not been the airplanes or the cost structure or customer demand but rather the current credit freeze, and whoever you want to blame for that.
Just as his company, DayJet, had proved that there was a business in using small jets for short-haul, on-demand service and was poised to expand its market, the credit market froze.... "All of the metrics are wonderful," [Iacobucci] said. "We're getting repeat buys. We're getting people paying at the price points we want. But we haven't been able to raise the capital.
In case it's not obvious, companies like DayJet need to expand to succeed because of the same network-efficiencies principles that determine the value of cell phone systems, social-networking sites, companies like FedEx and eBay, and modern networks in general. The more people who are already connected, the more attractive it becomes for each new member to join. Thus the familiar Metcalfe's Law, from Bob Metcalfe: the value of a network is proportional to the square of the users it connects.
For an air taxi company, this means: the more cities it can fly to (that is, the more "nodes" in its nework), the more attractive it becomes to new customers and the more efficiently it runs (because fewer wasted return trips and "deadheads.") That is why the DayJet plan called for adding new cities every month. And this is why, according to the DayJet officials and others, their business plan would have supported continued expansion through this year and beyond -- in "normal" credit circumstances. Their plans had allowed for oil at well over $100 a barrel -- but not for an inability to get working capital at all.
Where, when, and whether small-jet taxi services will become successful is impossible to say. But it's worth noting, as this Times story does, that the impediment to date has not been the airplanes or the cost structure or customer demand but rather the current credit freeze, and whoever you want to blame for that.
