“We’re a software and logistics company that only happens to be making money flying planes.”
– DayJet founder and CEO Ed Iacobucci as quoted in Fast Company magazine, May 2007 (emphasis added)
Maybe the ego behind that statement — not the economy’s negative effect on the capital market, not the alleged failures of the Eclipse 500 — was the real factor in DayJet’s demise. Maybe that elitist mindset, the arrogance that drives a CEO to boast that his company is “making money flying planes” months before it sells its first seat, was what really killed DayJet.
Or maybe not. Maybe Mr. Iacobucci was correct when he said that DayJet’s failure to obtain an additional $5 million in bridge financing was the reason for the September shutdown and subsequent bankruptcy filing.
Maybe his after-the-fall statement that “during the past year, we have demonstrated, beyond a reasonable doubt, that customers will sign up, purchase and become frequent users of this new service — the DayJet ‘per-seat, on-demand’ model works” was dead accurate.
Or, again, maybe not.
We say “maybe not” because Iacobucci, in a moment of apparent candor, later admitted to Jennifer Harrington of Aviation International News that DayJet had only been selling an average of 15 seats per day after almost a full year in business.
“If we had gotten 30 to 35 tickets a day, we would have been OK,” he told Ms. Harrington.
Hhhmmm. At the time, DayJet owned a fleet of 28 Eclipse 500s with a total of more than 100 passenger seats (had they all been in service at the same time, which they never were) and claimed to serve approximately 45 community airports throughout the Southeast. It also had, according to its bankruptcy petition, about $4 million in liabilities.
According to public records, DayJet raised somewhere in excess of $250,000,000 during its brief lifespan. It was, the company bragged in one press release, “among the best capitalized pre-operational passenger air carriers in U.S. aviation history and the largest in the on-demand sector.”
Could the addition of 20 more fares per day possibly have produced a survivable return on an investment of that magnitude?
Given that a significant portion of that $250,000,000, including more than $500,000 spent on political lobbying, was invested in making sure a majority of humans from Alaska to the Amazon recognized the word “DayJet” what went wrong?
Why were only 15 people a day taking advantage of the opportunity to “Fly On Demand?” Surely there was something more seriously askew than the fact that FAA regulations differentiating air taxi services from scheduled airlines prohibited DayJet from actually flying on demand. Even flying “somewhat on demand” (within a window of a couple of hours) should have produced more daily passengers than 15.
Maybe the real issue, as some observers have speculated, was a basic misunderstanding of the business-to-business nature of the air-taxi market on the part of DayJet’s marketing gurus.
Forgive us a brief digression …
Roughly ten years ago, Panasonic entered the rugged portable computer market with its first Toughbook model. Panasonic Portable Computer Company (P2C2), as it was then called, was a ground-level startup from a company with zero presence in the U.S. computer market.
In launching Toughbook, Panasonic spent somewhere between zero and virtually nothing on advertising. What they did invest in was the most obsessive-compulsive, bloodthirsty, workaholic sales force in the B2B technology jungle.
They hired people who left their homes before dawn every Monday and returned shortly before or after midnight every Saturday. While gone, they spent every day from 8 a.m. to 5 p.m. pitching enterprise IT managers and chief financial officers and every evening from 6 p.m. til the wee hours drinking with those same executives.
If you knew what to look for you could easily spot them waiting for the airport shuttle the morning after one of those marathon sales days. They were the people with the sharpest clothes, straightest ties and shiniest shoes hanging around the hotel lobby at 6 a.m.
Five years after launch, Panasonic’s total market share was more than 50 percent, its share of the law-enforcement market was over 70 percent and its profit margin topped 30 percent in an industry where an 8 or 9 percent margin was considered excellent.
Today, competing against such well established companies as Dell and General Dynamics, Toughbooks have a high 60-something percent total market share and more than 90 percent of the law-enforcement market.
The point is, P2C2’s managers understood B2B selling. They knew that at the end of the day most corporate buying decisions aren’t about product or even about price. They’re about return on investment and productivity.
Did DayJet understand this? Did its executives realize that the only way to make their airline fly was on the wings of hundreds — and eventually thousands — of business travelers? Were they aware that the subjects of untold thousands of bad corporate jokes — the so-called “bean counters” — could have cared less about the number of $2 million aircraft DayJet had on order (about 1400) or the hoopla and political pontifications that frequently accompanied each DayPort announcement?
Did DayJet devote enough of its $250,000,000 to wooing CFOs, sales and field force supervisors, office managers at law and accountancy firms and other key players charged with decided when, where and how other executives travel?
DayJet — like the rest of the air-taxi industry — had a great B2B story to tell. Changing a two-day trip into a one-day turnaround and a full-day sales call into a half-day visit increases productivity and return on investment in almost direct relationship to the amount of time saved and substantially decreases TCOT (Total Cost of Transportation).
Those are the kind of financial realities virtually guaranteed to warm the heart of any executive faced with initialing hundreds — or even dozens — of monthly travel vouchers. The question is whether DayJet took those facts and ran with them. Ran with them into conference rooms, executive suites, corporate dining rooms, and trade show workshops?
The evidence — the shocking 15-tickets-a-day evidence — indicates that it did not.