3. INTER-ISLAND TRAVEL, THE CHALLENGE WHICH HAS LED TO THIS
MARKET OPPORTUNITY
The topic of travel between the islands of Trinidad and Tobago has been the subject for discussion on
several recent occasions. The issue has seen many solutions tested over the last two decades, some
successfully for a while and others not successful for any significant period of time.
There are just two modes of transportation, by sea and by air and these make use of a very limited number
of routes, leaving travelers to make their way to just one point of embarkation and from one point of
disembarkation in the case of each mode (sea and air) of transportation respectively, for each island.
While operations for both the air route ( “ the air bridge” ) and the sea route ( “ Ferries” ) have periodically
improved, travelers still often feel great 'pain' when it comes to making travel arrangements, particularly
during periods of high demand for the two services.
The air route is operated by an enterprise which has two distinct missions, to operate a regional and
international carrier and to operate the domestic short haul “ air bridge “. These two missions aren't entirely
compatible and as a result, the domestic service on too many an occasion, falls short of passenger
expectations for the general public wishing to make use of the service. The route is considered to be under
served however it is heavily subsidized as a result of the equipment (type of aircraft) being used to perform
operations.
The Ferry services caters to a slightly different travel need. While the “Fast Ferries” can be considered as
an alternative to travel by air, the journey takes over 4 times as long. The inter Island Ferry takes much
longer and is used by those needing to transport vehicles and heavy cargo predominantly. The Ferry
services offers a much lower price for those not concerned with time.
4. INTER-ISLAND TRAVEL, THE CHALLENGE WHICH HAS LED TO THIS
MARKET OPPORTUNITY
Travel by sea and by air, has, up until now, been
restricted to a limited number of departure points
and destinations for each service. While this may
be an efficient way for operators to handle their
passengers, it leaves the passengers with
sometimes significant journeys over land to
traverse at each end of their inter-island travels.
This new business model represents an
innovative approach to the way inter-island
transport is to be structured and operated.
The main characteristic of the new approach is to
make use of seaplanes and to have multiple
points around each island from and to which
aircraft will pick up and deliver passengers and
light freight.
While the technology to be used is far from being considered a recent innovation, several other aspects to be
employed for the new business model make it a disruptive one. Key strategies employed from the onset will
make the venture easy to defend against possible disruption or provide opportunity to mitigate against the
effects of inevitable future disruption should that occur. The creation of multiple waterdromes providing for
some one hundred and twenty possible routes (only 20 or so anticipated to be viable as profitable ventures),
constitutes a ' game changer ' for domestic business and leisure travel and light freight transportation
5.
6.
7.
8. TRINIDAD
Point Fortin
La Brea
San Fernando
Point Lisas
Port of Spain
Chaguaramas
Maracas
Mayaro
TOBAGO
Mt. Irvine
Stone Haven Bay
Great Courland Bay
Castara Bay
Tyrrel's Bay (Speyside)
Queen's Bay (Roxborough)
Scarborough
Magdalena Grand Resort
PROPOSED WATERDROME LOCATIONS – CONNECTING COMMUNITIES
A choice of five (5) locations from the adjacent lists, spaced around each island
9. REFERENCES:
http://www.dailymail.co.uk/indiahome/indianews/article-2334850/Protests-mar-maiden-flight-Kerala-seaplane.html
Waterdrome operation guidelines; Kerala Waterdrome operation application sample
.
http://www.trkl.in/pdfs/sea-plane-registration-guidelines.pdf
India recently introduced seaplanes for tourist operations in one of their lake
districts. The launch of the initiative was not without its challenges as indicated
in the article to which a link has been provided below.
CHALLENGES TO BE OVERCOME OR AVOIDED
The article indicated environmental impact studies
showed that the operation would not be harmful to
the environment however, the authorities did not
work closely enough with the local community to
ensure that the community was on board with the
idea. “ Transforming communities, empowering
commerce “ is a vision which looks to satisfy as
best as can be done, the interest of all
stakeholders in a community's development.
Cessna 182 ( Amphibian )
10. ' GO TO MARKET ' STRATEGY
MARKETING POSITIONING:
For business customers who are challenged
or dissatisfied with the current time it takes
to complete a full journey between both
islands, the use of strategically located
waterdromes from which to operate
seaplanes, reduces significantly the total
time spent traveling, unlike that required
when using either the current sea bridge or
the air bridge.
( TOTAL TRAVEL TIME SAVED )
HIGHLOW
LOW
HIGH
( SCHEDULE )
( FREQUENCY )
BRANDING:
We are time savers
MARKET SEGMENTATION:
Business community ˃ Courier Services & light freight transport
Business community ˃ Frequent Travelers
High net worth individuals ˃ Weekend Leisure travelers
11. Conventional Air Taxi business model:
-------------------------------------------------------
Return trips per day = 6
Passengers per trip = 2
Operational days per year = 350
Revenue per passenger = $ 1500
Annual revenue = $ 6,300,000
Subscription based Air Taxi business model:
------------------------------------------------------------
Monthly revenue per client = $ 15,000
Operational months per year = 12
Number of clients per aircraft = 30
Annual revenue = $ 5,400,000
Non-subscription Light Freight business model
-----------------------------------------------------------------
Number of individual trips per day = 12
Target number of freight lots per trip = 9
Number of operational days = 350
Weight per lot = 30
Charge per pound (lb) = $ 5.50
Annual revenue = $ 6,237,000
FINANCIALS – BUSINESS (MODEL) CASE PARAMETERS
Note:
- Figures represent conservative targets
- Business model revenues are cumulative
- Currency in Trinidad and Tobago dollars (TTD)
Cessna 208 Caravan ( Amphibian )
Cessna Caravan (Cessna 208B) Amphibian
------------------------------------------------------------
The following assessment considers operation of the Cessna Caravan* amphibious aircraft on routes of no more than 100 nautical miles
(nm). The goal being to leverage the carrying of high value, low weight, priority freight in combination with business travel services.
12.
13. Annual Operational Profit / Loss:
--------------------------------------------------------
Revenue
($ TTD)
6, 300, 000
5, 400, 000
6, 237, 000
==========
17, 937, 000
Costs
($ TTD)
1 ,392, 400
6 ,895, 431
3 ,190, 128
360, 000
930, 664
455, 000
==========
13, 223, 623
===================
Gross: $ 4, 713, 377
Profit :
FINANCIALS – GROSS PROFIT
NOTE :
1/ - Figures represent those for a fleet comprised of a single aircraft
2/ - Aircraft, Cessna 208, seats six (6) in VIP configuration
3/ - Return flight ( incl. Turnaround ) in one and a half hours average
4/ - Typical operational day covers 12 hours
5/ - Passenger Load Factor = 33% ( 33% to 50% )
6/ - Non-subscription freight Load Factor = 38%
Cessna 208 Caravan ( Amphibian )
14. FINANCIALS – GROSS PROFIT
Cabin cargo cabinets designed to maintain luxurious
atmosphere within cabin.
Each cabin cargo cabinet is designed to contain a
maximum weight of a 180 lb.
Cabin cargo cabinets are intended to replace fwd seats
and provide for augmented cargo revenues.
Fully loaded cabin cargo cabinets typically generate
greater revenue when compared to carriage of adult
passengers, $1,980 TTD versus $1,500 TTD ( return
flight basis ).
15. FINANCIALS – GROSS PROFIT
CARGO CABINET,
CAPACITY 180 LBS,
REPLACES
REMOVABLE
FRONT SEAT
REMOVABLE
REAR BENCH
IN CARGO AREA
REMOVEABLE
FRONT SEAT
REPLACEABLE BY
CARGO CABINET,
CAPACITY 180 LBS
CARGO HOLD
CAPACITY FOR
620 LBS OF LIGHT
FREIGHT
FWDAFT
CESSNA 208B CARAVAN;
VIP INTERIOR CONFIGURATION
Additional Revenue :
---------------------------
12 x 30 x 12 x 350 x 5.50 = $ 8, 316, 000
@ 50 % Load factor = $ 4, 158, 000
Augmented gross profit = $ 8, 871, 377
Additional cargo { Light Freight } capacity through removal of two
seats in the fwd VIP configuration area and replacing them with cargo
pallet cabinets capable of holding 180 lbs (six 30 lb lots) each.
17. FINANCIALS – INCOME STATEMENT & MARGINS
Two aircraft
6 return trips per day per aircraft
2 Tickets sold per flight
30 Monthly subscriptions
Passenger Load factor = 50 %
Cargo Load factor = 36 %
Augmented cargo Load Factor = 50 %
Augmented Gross Profit = $ 14,134,750
Expenses: = $ 3,821,250
Financing = $ 6,312,664
Net Profit (b/f tax): = $ 4,000,836
Single aircraft
6 return trips per day
2 Tickets sold per flight
30 Monthly subscriptions
Passenger Load factor = 50 %
Cargo Load factor = 36 %
Augmented cargo Load Factor = 50 %
Augmented Gross Profit: = $ 7,067,375
Expenses: = $ 3,821,250
Financing = $ 3,156,332
Net Profit (b/f tax): = $ 89,793
Single aircraft
6 return trips per day
2 Tickets sold per flight
30 Monthly subscriptions
Passenger Load factor = 33 %
Cargo Load Factor = 38 %
Gross Profit: = $ 4,988,375
Expenses: = $ 3,821,250
Financing = $ 3,156,332
Net Profit (b/f tax): = $ 1,989,197
Two aircraft operation
with enhanced cargo
Single aircraft operation
with enhanced cargo
Single aircraft operation with
min regular cargo qty.
Revenue = $ 17, 937, 000
Operating margin = 28 %
Profit margin = < 0 %
Revenue = $ 20, 291, 000
Operating margin = 35 %
Profit margin = < 1 %
Revenue = $ 40, 582, 000
Operating margin = 35 %
Profit margin = ≈ 10 %
Excel spread sheet for carrying out basic financial simulations accompanies this proposal; also includes ability to consider multiple aircraft
18. ' SCALING UP ' THE ENTERPRISE
″ Transforming communities, empowering commerce ″ is the long term vision which will facilitate growth. As
each route is established and attains the desired target payload, new routes will be established to connect
the ' next best ' communities poised for a rapid increase in economic activity. Driven by the need for
movement of freight and business people during the expansion of commerce, it is anticipated that the
business may be scaled in size as outlined below:-
The target maturity usage for each route is 83 % of max payload
with full fuel. Under such a circumstance, an aircraft generates in
excess of $ 12 million TTD in gross revenues per annum. Should
the need on such routes continue to demand additional capacity
as a result of expanding commerce, the move to application of
larger aircraft such as the Twin Otter is warranted, as double the
payload of the Cessna Caravan can be carried. The smaller
aircraft can then be applied to develop additional new routes.
to
Scalability of the enterprise is largely linear however, application
of larger aircraft to mature capacity routes experiencing
increasing demand, gives rise for the opportunity to step up the
level of profitability periodically.
In keeping with the vision “ Transforming communities,
empowering commerce ” , The pursuit of Vertical Markets will be
part of the long term growth strategy. ‘ Up selling ’ to clients as
they grow in size and sophistication in an expanding economy is
considered a tactic to facilitate both sustainability and scalability.
19. THE WAY FORWARD
It must be appreciated that most of the information supporting the creation of a business, along the lines of
the idea presented in this document, needs to be validated. Many of the assumptions made require some
sort of field study or market research to be performed in order that they be confirmed. There is much
anecdotal evidence as to the ‛pain’ travelers experience when it comes to quick and easy transport between
the two Islands. Tobago, in particular, has led the chorus on the issue and is front and center when it comes
to seeking a sustainable solution to ensure that the island's economic growth is not hampered, as the nation
of Trinidad and Tobago's development continues. In this light, it is believed that consideration of a business
model, based on the concept outlined within, may very well find an interest and a spirit of cooperation
expressed by the authorities responsible for economic growth and development in many communities which
will be served by such a venture.
KEY PRELIMINARY ACTIVITIES:
The carrying out of a survey is required in order to clearly
understand the actual needs of the business community
when it comes to inter-island travel and transportation.
Identification of communities most suited for the
establishment of sea plane routes in terms of size,
economic activity, future growth, physical location and
appropriate coastal geography,is necessary and will require
site visits.
Other preliminary activities include gathering of updated hard data to confirm the analysis carried out with
respect to aircraft operational cost in terms of selection as well as other supporting financials presented within.
20. THINGS WHICH CAN MAKE YOU GO “ hmmm”
SME - FOOD INDUSTRY CASE;
You currently sell ' street food ' items at $ 55 per item ( each weighing just
under 3/4 lb ). You decide that you'd like to do the same in other large
towns as a franchised style operation working with food truck owners to
supply their product offering but you can't yet justify investing in new
production locations. You however already have the capacity to scale up
production at your current location. You choose to ship instead to multiple
locations each morning to meet the lunchtime demand and at $5.00 per lb
shipping cost, your gain / pain ratio is just over 3:1 (at 20% gross margin
and additional handling cost not considered) but you want to grow the
markets so that you can eventually justify setting up production in the
most lucrative areas.
SME - ONLINE PURCHASES, COSMETIC PRODUCTS DISTRIBUTOR CASE;
You plan to become a local distributor for an international supplier of natural
cosmetic products with short shelf lives and purchased on-line. Your business
model calls for you to operate as a 'lean business', there can be no plan for
warehousing or inventory keeping. Once your product clears customs, you need
to get it on its way to the end customer immediately. You collect it and dispatch it
that very day as light freight. At $5.00 per lb shipping cost, you will pay $215 to
ship 300 (3 cases) of 2.3 oz jars of cosmetic product per month. Your annual
increase in revenue (at $60 per jar) is $216,000 and your profit (at $12 per jar) is
$43,200. Your annual increase in cost (shipping only) is $2,586 Your gain / pain
ratio is over 16:1
21. DISCONTINUOUS, DEFENSIBLE, DISRUPTIVE:
An enterprise built around the idea encapsulated in the defined
value proposition, one which makes use of the discontinuous
innovative approach of having multiple locations from which to
operate, can prove a very defensible and disruptive business
model by establishing early - through purchase or lease of
lands, signing of exclusivity agreements with local authorities
for maritime operations in the most suitable locations - beach
heads. These very beachheads can later be leveraged in the
face of competition as competitors would be required to pay
fees in order to make use of lands owned or facilities already
established by the enterprise. Partnerships with local
communities are thus at the core of the strategy necessary to
fulfill the vision; “Transforming communities, empowering
commerce”. It is this very long term vision which will usher in
sustainable growth as the enterprise essentially becomes a
platform for others to build their businesses upon. Through
geometric growth of those businesses which come to rely on
the enterprise, its (the enterprise) own linear growth will be
able to benefit from stepped increases in capacity (deployment
of larger aircraft) in response to growing demand and this will
effectively allow stepped scalability.
THE WRAP UP
STRATEGY :
Commence operations with a chartered Cessna 182 ( $ 1000 CAD / hr ; incl. Pilot ) to validate value proposition.
Offer discounts of $ 200 TTD on a return ticket and $ 2,000 TTD on a monthly subscription while the smaller aircraft is being employed.
Replace the Cessna 182 with a Cessna 208 Caravan on routes as load factors necessitate; cancel discount.
Replace the Cessna 208 Caravan with the Viking Aircraft DHC Twin Otter on routes as load factors necessitate.