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DayJet Digs In To Survive Capital Drought
DayJet Digs In To Survive Capital Drought

Very Light Jet air taxi startup DayJet plans to concentrate on operating efficiencies in an attempt to inch toward profitability after scaling back aggressive growth plans that hinged on investment from the capital markets. DayJet announced last month that it would curb expansion plans and cut almost 40 percent of its work force after the air taxi was unable to raise the necessary capital to fund the growth (BA, May 12/213).

DayJet Founder, President and CEO Ed Iacobucci told BA that the company has revised its business plan to cover operations well into next year, but said "we´re not making money yet. We need the scale to make the money." DayJet believed that the company would need 30-50 aircraft serving 20-30 "DayPort" markets to reach profitability. But with the capital markets tightening up, Iacobucci said the company has to proceed much more efficiently and concentrate on building and reinforcing its existing markets to reach profitability.

The company had planned to take up to 100 Eclipse 500 Very Light Jets this year, but has halted those deliveries for the remainder of the year. Iacobucci said DayJet essentially gave up its positions for 2008. "If I keep taking airplanes, we wouldn´t last at all," he said. But the company hopes to resume deliveries next year, Iacobucci said, adding, "We´re going to live to fight another day."

Flying Only 10 Aircraft Per Day

The company currently has 28 aircraft in its fleet, some of which are still undergoing a number of the Eclipse upgrades, such as being retrofitted with the Avio NG avionics system. DayJet makes about 10 aircraft available for operations on a given day. Other aircraft are used for training or shifted in and out of operations. Others, however, were meant for use in the additional markets that have been placed on hold.

DayJet originally raised about half of the financing it needed and then planned to demonstrate that its business model worked before securing the additional money. But Iacobucci said the company´s timing was poor. By the time DayJet went for its next round of financing, the capital markets had started to dry up, he said.

DayJet is continuing to submit financing proposals, he said. "The well´s not totally dry," Iacobucci said, noting the company has received some additional financing. Some would-be investors have suggested that DayJet hold tight until the markets improve, he said. Others, however, shrink away immediately after seeing the word airplane or transportation in the proposals.

DayJet will continue to add DayPorts, but select sites that are generally within the current operational boundaries. The company recently added two more - in Jacksonville and Sarasota, Fla. - which are drawing traffic from other DayPorts. The company now has a total of 12 DayPorts, but also will fly to numerous other destinations as long as the operation begins or ends at a DayPort.

Picking Strategic Sites

Building DayPorts is an expensive undertaking, Iacobucci noted, because it involves adding ground infrastructure, community development, some advertising and education initiatives. The company planned to expand its region to areas such as Greensboro, N.C. or Chattanooga, Tenn. But those plans will have to wait.

Picking strategic sites within the current DayPort boundaries not only will help maximize the current markets, but also optimize the use of the aircraft. Iacobucci said the company originally planned to reach a critical mass and then turn to optimizing its operations to make the markets as efficient as possible. Now the company is working toward filling aircraft and making the most efficient use of the aircraft. The company also hopes to squeeze out efficiency through new technologies, better routes and operations.

Iacobucci praised the Eclispe, saying it has proved to be a "really nice little aircraft for what we do with it." The E500 is a better fit for the air taxi model with short routes than for traditional charter, which may involve longer routes and require more range, he said. The DayJet Eclipse fleet has accrued more than 6,000 hours, about one-quarter of all the hours logged by the entire Eclipse 500 fleet, which now totals just more than 200 aircraft. But Iacobucci added that he will be "much happier when we get all of the IOUs and post delivery commitments," including the aircraft upgrades. Iacobucci said long-term plans still call for the addition of a larger aircraft to the service, but that may be two years away.

Despite the revised plan, Iacobucci was enthusiastic about the early returns of his business model. Membership, which numbered about 500 at launch in October, has grown to 1,750. Ninety percent of DayJet members live near a DayPort, and about 35 percent have become "regular" fliers, he said. DayJet is running about 600 flights per month now, and Iacobucci estimated that the carrier has generated some 2,000 revenue tickets.

"We absolutely have the demand to support the growth, but we have to have the capital to sustain the growth," he said. "Generally speaking, under normal circumstances, I´d be ecstatic right now."


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