Fairly comprehensive overview of the on-demand air travel (a.k.a. Air Taxi) space. Includes industry drivers, regional market analysis, insights on some of the players and also a financial analysis from different perspectives.

1. On-Demand Air Travel
Very Light Jets (VLJ) Impact the
Transportation Paradigm
February 20, 2008

2. Summary
• The market is developing to fill the gap between commercial travel and
full or partial private jet ownership.
 There’s a clear service opportunity.
• Current demand in the northeast region of the US is estimated to be in
excess of 1,000 flights per day.
 The market is here now.
• Existing on-demand air travel (ODAT) operators in the southeast region
of the US have been successful and are expanding operations.
 Pioneers are doing well.
• Industry economics support strong returns under expected initial
conditions and offer accelerated returns as network effects develop.
 Financial returns can be very attractive.
February 20, 2008

3. What is On-Demand Air Travel?
• Point to point – Typically using small airports.
• Unplanned – Clients set flight schedules.
• Small planes – One to four passengers.
• Flight times – One to two hours.
• Fares competitive with full-fare coach + time.
• No up-front or capital investment required.
• Other model options being pursued:
– Larger planes with bathrooms for longer trips.
– Pricing per-seat versus per-plane.
February 20, 2008

4. A Mix of Catalysts
• Commercial air travel challenges
– Increasing access time to/from airport
– Longer delays at check-in and security
– Disruptions and delays more common due to higher volumes.
• Urban centers have expanded geographically
– Less convenient to major airports
– More congestion on roads and rails
– State and local governments are funding solutions.
• New aircraft technologies (VLJs)
• Developing infrastructure for small airports (SATS)
• Greater demand for speed, privacy and security
February 20, 2008

5. Analog to Digital:
Small Aircraft Transportation System (SATS)
• Proof of concept pioneered by NASA five year R&D
program from 2000 to 2005
• SATS extends safe, new technology-supported air
transportation beyond commercial airports to thousands
of small public use landing facilities nationwide
• VLJs combine economics and technology for SATS to
become new paradigm consumer air transport option
• VLJ on-demand air transport services considered critical
market enablers for advancing SATS vision
February 20, 2008

6. VLJ + SATS = Disruption
• VLJ on-demand air transport services within SATS
environment could recast consumer air transport
paradigm
– Shift consumer use and air traffic away from
commercial hub airports
– Reduce current capacity strain on ATC system at hubs
– Support local economic development around small
public use airports
– Resulting travel planning and economic ripple effects
from evolution of personal air transportation market
February 20, 2008

7. VLJ Market Growth Forecasts
• Multiple industry segments include air taxi,
charter, business aviation and owner-operators.
• Some prior forecasts:
– FAA: US market to see 400-500/year with 6,300
operating in 2020. (2007)
– Embraer: Between 5,200 to 5,700 by 2017.
– Honeywell: 6,500 by 2016.
• Current consensus thinking is around 800-900
deliveries per year through 2016.
February 20, 2008

8. Market Analysis Model
TSAM model developed by Virginia Tech Air Transportation Systems Laboratory in conjunction with NASA.
February 20, 2008

9. Headline Market Study Results
Year Annual Cumulative
Demand Demand
2007 322,170 322,170
Large market exists today
2008 330,000 652,170
versus being an emerging
2009 337,714 989,884
growth market.
2010 345,762 1,335,646
2011 354,852 1,690,498
2012 363,793 2,054,291
2013 372,947 2,427,238
2014 381,975 2,809,213
2015 390,635 3,199,884
February 20, 2008

10. Shifting Demand from Driving
Year Automobile Commercial Air
2007 277,074 45,291
Round trips per year 2008 283,885 46,335
shifted to on-demand air 2009 290,457 47,489
travel. 2010 297,472 48,495
2011 305,356 49,731
2012 313,083 50,932
2013 321,073 52,118
2014 328,858 53,376
2015 336,360 54,524
February 20, 2008

11. Market Dynamics
2009 2010 2011 2012 2013 2014 2015
Trip Demand (000) 337 345 354 363 372 381 390
Share 1% 7% 20% 25% 30% 35% 40%
Trips (000) 3.4 24 71 91 111 134 156
Passenger Hrs. (000) 4.2 32 103 136 167 200 234
Revenue (M) $9M $68M $216M $286M $352M $421M $492M
Trips/Day/Plane 1.0 1.7 2.0 2.2 2.4 2.6 2.8
Planes Required 11 46 118 138 155 171 186
Rev/Plane (000) $787 $1,488 $1,827 $2,079 $2,268 $2,457 $2,646
@10% Net $1M $7M $21M $29M $35M $42M $49M
@15% Net $1.4M $10.3M $32M $43M $53M $63M $74M
[$2100/hr, 1.25 to 1.5 hr trip, 300 day year]
February 20, 2008

12. Per-Plane Economics
Hours 600 800 1000 1200 1400 1600
Revenue (000) $1,260 $1,680 $2,100 $2,520 $2,940 $3,360
DOC (Fixed at $900/hr) $540 $720 $900 $1,080 $1,260 $1,440
SG&A (Fixed at $1M) $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Net (000) ($280) ($40) $200 $440 $680 $920
Net Margin (22%) (2%) 10% 17% 23% 27%
ROA (18%) (3%) 13% 28% 43% 58%
[$2100/hr, $1.6M Purchase Price, No Financing Adjustment]
February 20, 2008

13. Some Recent Adoption Signs
DayJet Expansion: New customer adds have increased from 20
to 50 per week. Corporate sale dynamics are solid (1 month
to trial, 75% ask for quotes, 50% fly, 35% repeat.)
SATSair Success: Using small piston planes the company has
found strong demand and raised prices. Business customers
take multiple planes. Flying 1,500 customers/month. Blind
dates. 26 planes. No advertising.
North American Jet: Very pleased with Eclipse planes. 100%
acceptance rates. Low DOC experience. Still some kinks.
Lots of planes with a handful of Eclipse 500’s.
February 20, 2008

14. Building an ODAT Business
• Value driven, feasible business model(s)
• Available/accessible financing
• Effective marketing
• Strong operations planning/execution
• Regulatory and governmental support
• Great management
February 20, 2008

15. Air 2.0 Industry Resources:
www.research2zero.com/ondemandairtravel.html
Or contact us:
Kris Tuttle
Director of Research
Research 2.0
1313 Washington Street
Boston, MA 02118
kris@research2zero.com
617-828-6462 (mobile)
617-381-4762 (office)
February 20, 2008

16. Supplemental Material/Appendix
February 20, 2008

17. VLJ Characteristics
• Advanced technology materials for lightweight airframe
and power plant manufacturing
• Next generation avionics, automated “glass” cockpit
• Maximum Takeoff Weight (MTOW) below 10,000 lbs.
• 7 person total (passengers + pilots) capacity
• Capability to operate safely on 3000 ft. runways
• Approx. 1,700 nm maximum flight range
• $.70 – 1.50 per mile direct operating cost (DOC)
• $1.2 – 3.7M acquisition purchase cost
February 20, 2008

18. VLJ Challenges
• Production – Orders and requests for VLJ planes have
expanded rapidly and scaling up has not been without setbacks.
• Certification – Meeting FAA requirements given limited
financial resources and timeframes is difficult.
• Financing – More robust financial options need to develop
over time to bring more VLJ options to the market.
• Flight Operations – Operators need to gain hours with the
new aircraft to move up the experience curve to optimize
operational efficiency.
It’s still early in VLJ market!
February 20, 2008

19. The Eclipse 500
• Innovative construction
• 6 seats, 1125 nm range
• 41,000 ft ceiling, 370 knots
cruising speed
• Pratt & Whitney PW610F
engines
• Reputation for quiet
operation
• 2,800 plane order book
• New European investment
and operational support
• $1.6M acquisition cost
February 20, 2008

20. Proliferating VLJ Options
February 20, 2008

21. SATS Solution Components
• Automated flight management systems for higher volume
operations at airports without control towers or terminal
radar
• Guidance and display systems for safe landings in low-
visibility conditions at minimally-equipped airports
• On-board graphic and data displays supporting safe single
pilot flight operations
• Seamless integration of VLJs into national air space
• Lots of interesting breakthrough technology coming
February 20, 2008