After the jump, via general-aviation news central here at its temporary HQ in Shaanxi province, China, another perspective on the DayJet situation. (Original Atlantic article here; recent news updates here and here.)
This is from Bruce Holmes, a prominent figure in my story (and in my 2001 book Free Flight, about the innovations that gave rise to Day Jet, SATSair, and similar companies.). He presents the "slowdown in growth is good for long-term success" outlook. Several other interesting items have arrived, which I'll add after I check with the senders to make sure they're meant for "publication."
From Bruce Holmes, formerly of NASA and now of DayJet:
"By now you have read in some media posts about DayJet restructuring operations. I wanted to personally put this news into context for you. In the end, I believe this adjustment will serve us very well.
"Effective this week, we have made the difficult decision to scale back DayJet's 2008 growth plan. Because of this change in strategy, the company has reduced its employee base across most areas of its business. Most importantly, you'll want to know that these changes were caused by external economic factors and are not a reflection of a weakness in the underlying DayJet business model.
"In fact, our first phase of operations, the "Proof of Concept" phase, has gone exceptionally well. Response to our "Per-Seat, On-Demand" service during this first phase was very consistent with our expectations and we answered many nagging questions: Yes, customers will fly in a small jet; Yes, customers will embrace the per-seat model; Yes, customers will pay a premium for tangible value (of time); Yes, the technology works as planned; and most importantly, Yes, we can find these customers. All in all, we have signed over 1,500 members, more than 550 of which are active travelers, and nearly 200 are frequent flyers.
"However, a proof of concept is only the first step to profitability. The next step is equally important -- growing the "Network" to a density that generates operating margin. As we shared with you, our projections have always indicated a network of 30-50 "line" aircraft serving 20-30 fully developed DayPort markets was needed to reach critical scale. My way of thinking about that point is in terms of network performance that shows up as increasing load efficiencies (less empty seats). More importantly, this required a $40M infusion of operating capital in the first quarter of 2008. I won't dwell on this point, but suffice it to say that given the current state of the U.S. capital markets, the timing of our planned financing could not have been worse.
"Without the growth capital required to open new DayPorts, the company must scale back to a size that is consistent with the demand of our existing customers and service region. DayJet's business model is based on operating at a critical mass, requiring investment ahead of growth. We hired and trained a number of employees in anticipation of a rate of growth that would be paced by a rate of capitalization that is - unfortunately - not available in the near term environment.
"This restructuring will not reduce our existing service region. It will not impact our quality of service to our customers, and most importantly, it will not impact our commitment to safety, which is the heart of our service. We will continue to operate and expand our service (albeit at a slower rate) to communities across the Southeast in response to customer needs. And when the capital markets recover, then we would expect to resume the growth forecast in our original plan.
DayJet has been fortunate to receive so much support and excitement from the regions we serve, our investors and the aviation community at large. Developing new markets is never easy, and I think it is important to be as forthcoming about our challenges as we are about our successes. "