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Wednesday, Jun 7, 2023

Surf’s Up!

When Surf Air announced its all-you-can-fly membership model two years ago it generated excitement in the tech community as a way to connect Silicon Valley with the growing Silicon Beach area around Santa Monica. But after delays in getting the airline going and a failure to establish its hub at Santa Monica Airport as first planned, doubts began to grow about the service. Now, though, the airline has made progress that may give pause to detractors skeptical the business model can work. Surf Air started its scheduled flights last summer to the San Francisco area from Burbank Bob Hope Airport, began flying to Las Vegas last month and plans to add Truckee near Lake Tahoe as another destination in May. Also, it has raised $11 million from private investors, signed up 450 members and hired former Frontier Airlines head Jeff Potter to run the airline after founding chief executive Wade Eyerly stepped aside in favor of an experienced airline executive. “There is a chapter two,” Potter said. “They asked me if I would be willing to lead after the foundation has been set.” Surf Air, headquartered in Santa Monica, began flights in June using a model requiring members to pay a one-time $500 fee and monthly fees as low as $1,600 for unlimited flights. A corporate plan allows for more than one person on a membership. In the Los Angeles area, members fly in and out of Burbank Bob Hope or Hawthorne airports on the company’s three turboprop aircraft, which seat six people. At Bob Hope, Surf Air leases hangar space at Atlantic Aviation, a fixed-base operator, and during the week has morning and evening direct flights to San Carlos Airport, between San Francisco and Palo Alto. There are weekend flights to Las Vegas. For Westsiders, Surf operates from Hawthorne to attract passengers used to frequenting Los Angeles International Airport, about three miles away. That would include users such as Heather Rafter, who used to fly Southwest Airlines to and from Los Angeles. An attorney from the San Francisco Bay area with music industry and digital media clients in Los Angeles, she flies into Burbank on a frequent basis for both business and personal reasons. While private aircraft may conjure up images of wealthy passengers sipping champagne as they jet off to Aspen or Monte Carlo, Rafter said Surf Air is not a luxury. “It is a networking tool and I’ve seen conversations and potential deals happen on flights,” she said. However, for all the progress that the airline has made, its future is not assured, given how the industry has generally shied away from such business models. Commercial airlines JetBlue Airways in New York and Sun Country Airlines in suburban Minneapolis-St. Paul, have offered all-you-can-fly pricing models but only briefly as limited promotions. Greg Raiff, president and chief executive of Private Jet Services Group, a Seabrook, N.H. aviation consulting firm, said membership models have been tried before but often lose money because the revenue doesn’t match the cost to provide service. “Aviation is an expensive thing,” Raiff said. “If they don’t ramp up membership they cannot sustain the business model – and airplanes have this funny habit of breaking.” Westside origins The company was founded by Wade Eyerly and his brother, David, who are Kansas City, Mo. natives. David Eyerly, 29, who remains with the company, brings the aviation background having earned a pilot’s license, worked for Frontier Airlines and the Transportation Security Administration in Dallas and earning a degree from Embry-Riddle Aeronautical University near Ogden, Utah. Wade Eyerly, 34, has a background in political and media work with former Vice President Dick Cheney’s advance media team in 2004 and Mitt Romney’s presidential campaign in 2012. The pair refined their business plan in 2011 during three months at MuckerLab, a Santa Monica incubator for startups. That time also gave them access to venture capitalists intrigued with their proposal and willing to put up money. Surf Air was able to raise $11 million from private equity firms such as Anthem Venture Partners in Santa Monica and Velos Partners in Los Angeles, and from individual investors, including real estate developer Rick Caruso and actor Jared Leto. While the company drew intense early coverage, it is not the only startup trying a membership model. Wheels Up in New York City began service in November. Its founder Kenny Dichter also started fractional aircraft firm Marquis Jet. Structure Capital, another Surf Air investor, has also put money into Wheels Up. The startups are targeting a niche traveler who wants more than commercial airlines can offer, but doesn’t necessarily want – or can afford – to step up to fractional ownership in a private plane, which allows companies and travelers to buy a shares of an airplane for a guaranteed number of hours. It can cost thousands of dollars per hour to buy blocks of travel time in such companies, while individual charters are can be even more expensive. “If (membership charters) are able to lower the cost of entry for private air travel, you bring in a new tier of potential user,” said Jeff Kohlman, a principal with Aviation Management Consulting Group in Colorado. Initially, Surf Air wanted to fly out of Santa Monica Municipal Airport to be close to its target tech client base. That did not work out due to community efforts to limit flights at the airfield, which the city is seeking to close. Bob Hope, with its proximity to the city’s large media companies, became a hub based on response from people interested in becoming members when the concept was first announced in 2012. “Burbank was one of those markets that floated at or near the top,” Potter said. Surf Air employs a concierge at the airport who greets and assists members. Because the airline is members only, members are allowed to skip Transportation Security Agency checkpoints, saving time. “(Surf) gives an executive feel at a price that people with an average income can afford,” said Drew Faherty, the airport concierge. Surf Air acquired three $4 million Swiss-made single-engine Pilatus PC-12, which are flown by two pilots with a seating configuration for six passengers. Each passenger is allowed up to 30 pounds of luggage. The plane has a range of 1,500 nautical miles and top speed of 519 kilometers per hour. Potter describes the plane as “safe and fast” and it can make the flight from Burbank to San Carlos in less than 90 minutes. Bay area attorney Rafter became a founding member after hearing about the service from a client. “It has totally changed my law practice and I make it to more events in L.A. than I usually would,” she said. “I am a part-time general counsel and I like being hands on. I go on site when they need me.” Mark Alioto, chief executive of Enterprise Communication Media Corp., a Los Angeles software company, uses Surf Air for its flights to San Carlos. Like Rafter, he was a founding member who put his name on the waiting list three times to make sure he was accepted. Alioto has used private charter before but in those instances the cost was more and there was no guarantee the planes would leave on time if other passengers were waited on. “From a cost perspective it is not outrageous and the flights are always on time,” Alioto said. Potter assumed the chief executive post after meeting about a year ago with Sudhin Shahani, entrepreneur in residence at Anthem Venture Partners and chairman of the Surf Air board. Potter became a candidate to take over the airline given his background as chief executive of Frontier Airlines from 2002 to 2007. Frontier is a low-cost Denver airline serving destinations in the U.S., Mexico, Central America and the Caribbean. Growth forecast But Potter also has experience with membership models from his time as chief executive from 2007 to 2011 of Exclusive Resorts, a Denver-based luxury vacation and travel club. From that experience, Potter said he learned how to enhance the member experience by offering exclusive deals with partners such as other airlines or rental car companies. He foresees doing something similar at Surf Air. Shahani did not return calls for comment. The big question now is how much can Surf Air expand? The airline currently offers 18 flights a day during the week, and additional ones on weekends to Las Vegas. And it will not need an additional aircraft when it begins its service to Truckee. But to add other markets will require additional planes and capital. Potter would not discuss details of Surf Air’s finances and whether it is profitable but did say that the next round of funding would come from previous and new investors. The airline is pursuing a careful growth strategy with a “hold” program, a pre-sale concept in which prospective members pay the $500 deposit but no monthly fee until the market they want is added to Surf’s schedule. Potter said there is tremendous opportunity in California and throughout the Southwest. “Just this geographic area alone can support about 20 aircraft,” he said. But as much as Potter likes the membership model, he recognizes there are challenges as the company continues to develop and market the product. “We are spending as much time on our product and the experience as we are in just flying the aircraft,” he noted.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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